No respite for Indian indices

Wed, 10 Oct Closing

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Indian equity markets languished in the red throughout the trading session today on the back of persistent selling pressure across index heavyweights. The indices began the day's proceedings on a cautious note and subsequent hours only saw them move deeper into the red. There was no respite in the final trading hour either. While the Sensex today closed lower by 162 points (down 1%), the NSE-Nifty today closed lower by 52 points (down 1%). The BSE Mid Cap and the BSE Small Cap were not spared either as they closed lower by 1% and 1.5% respectively. Losses were largely seen in banking, metal and auto stocks.

As regards global markets, Asian indices closed weak today while European indices have also opened in the red. The rupee was trading at Rs 53.03 to the dollar at the time of writing.

MNC pharma stocks closed mixed today. While Sanofi India and Abbott India closed weak, GSK Pharma and Novartis found favour. As per a leading business daily, Sanofi India is looking to export its Allstar reusable insulin pen to countries in South Asia, Africa and Latin America. The company launched the pen in India recently at a retail price of Rs 650. India has nearly 50 m diabetes patients, more than any other country. This number is expected to reach 70 m by 2025. Hence, it is an opportunity Sanofi India is looking to capitalise on. It must be noted that Sanofi India's strength lies in the chronic therapy space which includes therapeutic areas such as cardiovascular, diabetes, central nervous system among others. Over the years, many of its brands such as Amaryl, Allegra, Cardace have managed to retain market leadership. This is despite fierce competition from generics players. Further, the company has also been more aggressive in terms of product launches as compared to some of its MNC peers on the back of active support from its parent company.

Banking stocks closed in the red today with the key losers being State Bank of India (SBI), HDFC Bank and ICICI Bank. Can a cut here and a nip there spell growth for the country? The 1% Statutory Liquidity Ratio (SLR) cut and the more recent 0.25% in the cash reserve ratio (CRR) has helped improve system liquidity. This will help reduce interest rates further even though the central bank continues to maintain its hawkish stance against inflation. Facing slackening demand for credit, some bankers have already taken the bold step to cut lending rates. Plus, they are currently holding excess government bonds of Rs 4 trillion and are now looking for new avenues to park their funds. In a recent meeting, ahead of the half-yearly monetary policy review bankers voted in favor of a further cut in the CRR. A cut in this ratio would add to lendable resources of banks. It would also help reduce their cost of funds giving a downward push to interest rates. Unless lending rates come down, one way or the other, it will be very difficult for India to meet its FY13 growth targets.