Sensex Opens Marginally Up; Sun Pharma Surges on USFDA Clearance

Thu, 12 Oct 09:30 am

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Asian stock markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.23% while the Hang Seng is up 0.14%. The Nikkei 225 is trading up by 0.47%. US stocks closed higher on Wednesday after the US Federal Reserve released a summary from its previous meeting that showed it believes the economy is strong enough to withstand another rate hike in December.

Back home, share markets in India have opened the day in the positive territory. The BSE Sensex is trading higher by 72 points while the NSE Nifty is trading higher by 35 points. The BSE Mid Cap and BSE Small Cap index opened the day up by 0.4% & 0.6% respectively.

All sectoral indices have opened the day in green with stocks from healthcare sector and realty sector leading the pack of gainers. The rupee is trading at 65.27 to the US$.

Pharma stocks have opened the day on a mixed note with Indoco Remedies and Sun Pharma being the most active stocks. Sun Pharma share price surged 2.5% in the early trade after the company announced that it has received an establishment inspection report (EIR) from USFDA for the company's Dadra formulation facility.

EIR indicates closure of plant inspection by the US regulatory agency.

The manufacturing plant in Dadra is Sun Pharma's second largest facility catering to the US market, after its Halol plant in Gujarat. The drugmaker primarily manufactures oral solid generic tablets at the Dadra plant.

In April, the USFDA had issued a Form 483 with 11 observations on the Dadra facility. Most observations were related to standard operating procedures but a few could have been viewed seriously by the regulator.

However, one shall note that regulatory compliance hurdles still remain for Sun Pharmaceuticals as the Halol plant is yet to get clearance from the regulator.

The USFDA last inspected the plant in the third quarter of financial year 2016-17 and raised nine observations for failing to prevent microbiological contamination and not meeting with testing design standards.

Moving on to the news from the IPO space. The initial public offer (IPO) of state-owned General Insurance Corporation of India was subscribed 80% on the first day of the bidding on Wednesday.

GIC Re's Rs 113.7-billion IPO received bids for 99.3 million shares against the total issue size of 124.7 million shares.

Undoubtedly, the insurance sector has huge potential for growth. Additionally, factors such as increasing youth population, rapid urbanisation, expanding financial literacy, and higher government focus on financial inclusion and risk coverage will spur demand further for insurance products in the country.

Therefore, with the stock markets buzzing, insurance companies are also making a beeline to capitalise on the IPO frenzy. After ICICI Prudential got listed last year, a number of both life and non-life insurance companies have lined up their IPOs this year.

Insurance Protection Deficient in India

But insurance protection in India remains grossly inadequate. This explains the huge protection gap of US$ 8.5 trillion for the country as of 2014. As per a Swiss Re report, India's protection gap stood at a staggering 92% and was the highest among all countries in the Asia Pacific.

Our big-picture editor, Vivek Kaul, recently penned a pertinent report on entire insurance industry. We strongly recommend you go through the full report on what's really happening in the insurance industry in India...and how it affects you. If you have not accessed Vivek Kaul's Letter yet, sign up here.

By the way, we have also prepared a guide to help you understand the valuation of insurance businesses.

Meanwhile, IPO of Indian Energy Exchange elicited good response from investors, with the issue getting oversubscribed 2.23 times on the last day of bidding on Wednesday.

The company aims to raise up to Rs 10 billion. On the final day, the offer received total bids for 11.8 million shares against 5.3 million shares on offer.

To know more about the both companies, you can access our IPO note on the same in our IPO section.

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

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