Realty stocks lead amongst losers

Fri, 20 Sep 01:30 pm

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The Indian markets are witnessing heavy selling pressure during the post noon trading session. Most of the sectoral indices are trading in red, barring stocks from healthcare sector. Realty and banking stocks are amongst top under performers.

BSE-Sensex is down by 453 points and NSE-Nifty is trading down by 154 points. While BSE Mid Cap is trading down by 1.42%, BSE Small Cap index is trading down by 0.74%. The rupee is trading at 61.98 to the US dollar.

Most of the Indian pharma stocks are trading in red with Ranbaxy Ltd and Wockhardt leading the pack of losers. Ranbaxy has announced that the company has received Paragraph IV (Para IV) certification from Watson on Absorica. This para IV means, Watson intends to launch the generic version of Absorica before the patent expiry of the drug. Absorica was licensed in by Cipher, who also manufactures the drug. Ranbaxy markets the said drug in US market. The patent in issue is set to expire in Sept 2021. Both the companies Ranbaxy and Cipher have filed litigation against Watson in order to defend its intellectual property (IP)for Absorica. Absorica was approved by the FDA in May 2012, and granted a three-year market exclusivity period, which expires in May 2015. Both the companies will pursue litigation, if Watson wins the litigation, it will be able to launch the drug. However no immediate outcome can be expected. The active pharmaceutical ingredient for Absorica is isotretinoin. There are some other generic companies which sell Isotretinoin in the US market. However,this drug can be launched only through a specific program of USFDA. And hence the approval rate for Isotretinoin drug is lower as compared to other generic drugs. Ranbaxy was trading down by 5.0% at the time of writing.

Majority of the energy stocks are trading in the red with Oil India and Indian Oil Corporation (IOC) being the major losers. Gas Authority of India Ltd and Cairn India are among the few stocks trading in the green. As per a leading financial daily, the Union Cabinet has given a go-ahead to Hindustan Petroleum Corporation Ltd (HPCL) for setting up a refinery and petrochemical complex in Rajasthan. The nine million tonnes refinery is being set up in the Barmer district of Rajasthan at a cost of Rs 372.3 bn. The project is a joint venture with HPCL having 74% share and the balance 26% share being held by the Rajasthan government. The Rajasthan government has agreed to provide an interest-free loan of Rs 37.4 bn for a period of 15 years from the date of commencement of production. The loan has to be repaid in 15 equal installments starting from the 16th year after commencement of commercial production. The refinery is expected to go on-stream in four years and will source 50% of its crude oil from Cairn’s Barmer oilfields and the balance through imports. Apart from petrol, diesel and LPG, the project will also manufacture 2.3 m tonnes of petrochemical products used in production of plastic. Reportedly, HPCL will have the marketing rights and the first right of refusal in case of purchase of the refinery products.

In FY13, HPCL's domestic market sales grew by 4.5% YoY ahead of the 3.6% YoY growth reported by the industry. HPCL has heavy capex plans for the future. It is reviving its plan to set up Rs 500 bn refinery-cum-petrochemical project (15 million tonne refinery and mega petrochemical plant) in Visakhapatnam to meet the local fuel demand. It has approached domestic and international energy companies for partnership in the project. HPCL stock is currently trading down by 1.9%.