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Indian Indices Near All-time Highs; Capital Goods Stocks Top Gainers
Mon, 18 Sep 01:30 pm | Prasheel Vartak, TM Team

After opening the day on a positive note, the Indian share markets have continued the trend and are currently trading comfortably in green near their all-time high levels. Except stocks in the pharma sector, all sectoral indices are trading on a positive note. Stocks in the capital goods sector and the auto sector are witnessing maximum buying interest.

The BSE Sensex is trading up 200 points (up 0.6%) and the NSE Nifty is trading up 75 points (up 0.8%). Meanwhile, the BSE Mid Cap index is trading up by 0.8%, while the BSE Small Cap index is trading up by 1%. The rupee is trading at 64.05 to the US$.

Moving on to news from stocks in the pharma sector. Dr Reddy's Lab share price is witnessing selling pressure on the markets today. The stock is in focus as the compnay announced that the US Food and Drug Administration (USFDA) has completed the audit of its API Mirfield Plant, United Kingdom.

As per a regulatory filing, the drug regulator issued a Form 483 to the company's facility citing three observations relating to violation of current good manufacturing practices.

As per USFDA, observations are made in Form 483 when investigators feel that conditions or practices in the facility are such that products may become adulterated or render injuries to health.

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At the time of writing, Dr Reddy's lab share price was trading down by 1%.

Meanwhile, Laurus Labs share price surged in the morning session before paring most gains on the back of an establishment inspection report (EIR) from the USFDA for the company's Finished Dosage Formulations (FDF) and Active Pharmaceuticals Ingredients (API's) manufacturing plant, Unit 2, in Vishakhapatnam, for the inspection completed in May 2017.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

The sector has faced great volatility over the years.

Is the Worst Over for all the Pharma Stocks?

We had written about the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

  • Over the past few years, risk in the US markets has increased. The US Food and Drug Administration has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

The list of pharma sector woes is long. So, is there light at the end of the tunnel? Girish Shetty, our research analyst thinks there is.

As per him, it doesn't make sense to paint all pharma stocks with the same brush. The leaders of the industry will certainly survive this phase. There are interesting, niche pharma stocks that are worth your attention.

Facing pricing pressures in the domestic and export markets, currency fluctuations, as well as manufacturing issues related to their plant, there is a transformation happening in the overall sector as to how business is done and will be done in the future.

Moving on to news about the economy, India's current account deficit (CAD) is expected to widen to 1.5% of GDP in 2017, from 0.6% in 2016 according to a report by Japanese financial services major, Nomura.

The report says that while the deficit is set to widen, net capital flows are expected to more than fund this deficit. It added that that the wider current account deficit in the second quarter and still- elevated trade deficit so far in July-August suggest that the current account deficit is set to widen sharply this year.

Nomura expects current account deficit likely at 1.5% of GDP in 2017 but noted that funding will not be a constraint.

The current account deficit increased to US$ 14.3 billion, or 2.4% of gross domestic product (GDP) in the April-June quarter of this year.

On a sequential basis, the CAD widened from US$ 3.4 billion or 0.6% of GDP in the January-March quarter.

According to data from the government, net foreign direct investment stood at US$ 7.2 billion in the reporting quarter almost double from its level in the same period last year.

Net portfolio investment also recorded substantial inflow of US$ 12.5 billion in April-June quarter, primarily in the debt segment, as compared to US$ 2.1 billion in same period last year.

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