Sensex Opens Flat; Dr Reddy's Lab Rallies 6.8%

Fri, 1 Sep 09:30 am

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Asian stock indices are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.46%, while the Hang Seng is up 0.32%. The Nikkei 225 is trading higher by 0.20%. The US stocks closed higher as investors reacted to economic data and took cautious hope from Washington's latest promises for long-awaited details of a tax reform plan.

Back home, share markets in India have opened the day on a flat note. The BSE Sensex is trading lower by 20 points, while the NSE Nifty is trading lower by 1 point. The BSE Mid Cap and BSE Small Cap index opened the day up by 0.4% & 0.5% respectively.

Barring IT stocks, power stocks and FMCG stocks, all sectoral indices have opened the day in the green with stocks from healthcare sector and realty sector leading the gains. The rupee is trading at 64.02 to the US$.

As per the data released by the Central Statistics Office (CSO) on Thursday, the Indian economy grew 5.7% in April-June, sharply lower than last year's 7.9% expansion in the same quarter as also the previous quarter's 6.1% growth, signs that the country was still reeling from the shock of demonetisation and disruption caused ahead of GST's rollout.

The April-June growth estimate, the lowest in at least five quarters, trended down on account of a sharp deceleration in manufacturing growth.

Reportedly, the silver lining was the buoyant performance by some segments in the services sector.

Meanwhile, the Gross Value Added or GVA growth, which serves as a more closely watched estimate for quarterly growth, remained unchanged from the previous quarter at 5.6% in April-June but fell sharply from the 7.6% growth recorded in the April-June quarter last year.

GDP growth may have raced slightly ahead of GVA, driven by strong indirect tax collections in April-June, masking a wobbly state in factories and firms.

Interestingly, India now lags China in the global growth rankings by a fair margin. China, which grew at 6.9% in the last two quarters, has bounced back as the world's fastest growing major economy since January, regaining the status from India after two years.

In fact, over the last twenty years, China has accounted for 11.5 percentage points out of 15.8 percentage points increase in the share of developing economies. While India's share grew from 3.9% to 7.2% of world GDP over the last twenty years.

China Way Ahead of All Emerging Markets

Just this one statistic tells us how much India needs to grow if we are to catch up with China. In fact, there's a strong argument that says we may never catch up with China.

However, we, at Equitymaster are confident that even if we don't match China, there will be many opportunities to create wealth in the Indian share markets.

For those investing based on macro clues, these are times to be a little skeptical. What you see could be too good to be true. And could be a very slippery premise for one's investment thesis. Ask superinvestors who have consistently beaten benchmark indices.

Our Research analyst, Kunal has been working on a project to answer this. They have travelled the length and breadth of the country to interview a bunch of value-oriented investors who've had tremendous success with investing.

Who are these super investors? And more importantly, how do they pick stocks? Which stocks are they picking?

To know more about these super investors, download a free copy of - The Super Investors Of India.

Moving on to the news from the pharma stocks. As per an article in the Livemint, California-based pharma firm Vivus Inc and Dr.Reddy's Laboratories have entered into a settlement agreement resolving a patent litigation pertaining to Qsymia (phentermine and topiramate extended-release) weight management capsules.

The agreement permits Dr. Reddy's to begin selling a generic version of Qsymia on 1 June 2025 or earlier under certain circumstances. In the event of a launch earlier than 1 June 2025, Vivus will receive a royalty on sales of the generic version of Qsymia.

The settlement with Dr. Reddy's concludes all patent litigation brought by Vivus against generic pharmaceutical companies that had filed ANDAs seeking approval to market generic versions of Qsymia.

One must note that innovators in the pharmaceutical industry make use of patents largely. They make heavy use of patents whenever they create a new drug. In one of the editions of The Equitymaster Digest, we have spoken everything that you need to know about patented drugs, its advantages and its implications. Here's a snippet:

• "That's how the innovators in the pharmaceutical industry work. They make heavy use of patents whenever they create a new drug. The patent allows them to recoup the high capital expenditure that goes into the research and development (R&D) of new drugs. Companies that have a patent on a particular product are immune from competition for the duration of the patent."

Notably, a number of patent infringement cases have been filed against leading Indian pharma companies and their counterparts in other countries over the last few years.

Indian pharmaceutical companies have been facing intense pressure on account of anti-trust cases too in the US.

Dr. Reddy's share price surged 6.8% in the opening trade.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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