Sensex Trades in Red; Dr Reddy's Jumps 6%

Thu, 21 Sep 01:30 pm

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After opening the day marginally in green, share markets in India have reversed the trend and are trading in red. Sectoral indices are trading on a mixed note with stocks in the pharma sector and stocks in the IT sector trading in green, while stocks in the metals sector and stocks in the realty sector are leading the losses.

The BSE Sensex is trading lower by 121 points (down 0.4%), and the NSE Nifty is trading down by 48 points (down 0.5%). Meanwhile, the BSE Mid Cap index is trading down by 0.6%, while the BSE Small Cap index is trading up by 0.7%. The rupee is trading at 64.72 to the US$.

In news from stocks in the pharma sector. Dr Reddy's Lab share price is among the top gainers on the bourses today after the US Food and Drug Administration (USFDA) issued an an Establishment Inspection Report (EIR) for Unit II of the company's formulation facility at Srikakulam Plant (SEZ), Andhra Pradesh.

The company had in May informed stock exchanges that an audit of Unit II of Andhra Pradesh-based Srikakulum Plant (SEZ) by USFDA completed with zero observations so and no form 483 was issued.

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.

Earlier this month, the regulatory authority of Germany issued six major observations related to Good Manufacturing Practices (GMP) for Indian drug major Dr Reddy's plant in Vishakapatnam. The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

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.

USFDA sweetener for Indian Pharma

In recent times, pharma companies were bogged down by mounting pressure from US Food and Drug Administration (USFDA) to adhere to quality standards at their manufacturing plants. In the past three years, the USFDA raised numerous regulatory concerns resulting in import bans and suspension of new drug approvals from facilities of Indian pharma companies. But what has come as a breather is a sharp pick-up in new drug approvals in 2017. During the period January-July 2017, 129 approvals for generic drugs were made. This is 45% higher from 89 approvals made in the corresponding period last year.

As per the Indian Pharmaceutical Alliance, the pace of drug approvals has gained momentum after they complained to FDA about delays last year. Approvals for drugs have also picked up after USFDA concerns at some of the manufacturing units were addressed.

At the time of writing, Dr Reddys' share price was trading up by 5.8%.

In news from stocks in the auto sector. Mahindra & Mahindra (M&M) share price is in focus today after the company said it has entered into an agreement to acquire Turkey's fourth-largest tractor manufacturer, Erkunt Traktor and Sanayii, and an associate company.

The deal is valued at an enterprise value of US$ 117 million.

M&M will acquire 100% of tractor making operations from the Armagan family for US$ 76 million.

In Erkunt Sanayi, the foundry business which provides castings to machining services, the Indian company will buy between an 80% and 100% stake for US$ 41million. The Armagan family holds 35% of the foundry business.

M&M, the world's largest tractor maker by volume, has been courting Erkunt for three years. The acquisition will allow the company to participate more actively in the US$ 3.5-billion farm equipment market of Turkey.

This is Mahindra's second acquisition in Turkey. It had taken over Hisarlar, a tractor implement specialist, in early 2017.

It will be interesting to see how M&M makes the most of the acquisition and utilize synergies to spur growth and penetration in the Turkish market.

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

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