Sensex Trades on a Volatile Note; Dr Reddy's Jumps 5%

Thu, 28 Sep 01:30 pm

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After opening the day marginally in red, share markets in India have remained range bound throughout the day and are trading flat. 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 5 points (down 0.1%), and the NSE Nifty is trading down by 12 points (down 0.1%). Meanwhile, the BSE Mid Cap index is trading up by 0.6%, while the BSE Small Cap index is trading up by 0.5%. The rupee is trading at 65.67 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 the company's Srikakulam plant (SEZ) unit 1, in 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.

The USFDA, on June 16, completed the audit of formulations Srikakulam plant (SEZ) unit I and issued a Form 483 with one observation, which it addressed.

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 4.3%.

In news from stocks in the oil and gas sector. According to a leading financial daily, the government plans to sell stake in ONGC oilfields to private firms.

Nearly 25 years after ONGC's prime discovered oilfields were privatised, the government is planning to allow private firms to take majority stake in the state-owned firm's producing oil and gas fields such as Mumbai High. The Oil Ministry plans to approach the Cabinet soon for allowing private firms to take participating interest (PI) in a nomination block, sources privy to the development said. The policy currently allows giving out of PI or a stake to a private company only in the blocks or areas awarded in open auctions under New Exploration Licensing Policy (NELP) since 1999. However only exploration acreage was auctioned under global bidding in such rounds.

ONGC produces 87% of its 25.53 million tonnes of oil from fields given to it on nomination basis. As uch as 95% of 23.3 billion cubic meters of annual gas production comes from nomination blocks.

The nomination fields include Mumbai High, India's biggest oil field, and Bassein gas field, the nation's biggest natural gas producer.

At the time of writing, ONGC share price is trading down by 0.1%.

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