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Sensex Pares Gains; Telecom Stocks Rally
Mon, 23 Oct 01:30 pm | Rini Mehta, TM Team

After opening the day on a firm note, the Indian share markets pared its morning gains to trade flat. Sectoral indices are trading mixed, with stocks in the realty sector & information technology sector leading the pack of gainers. While, healthcare stocks & FMCG stocks are trading in red.

The BSE Sensex is trading lower by 37 points (down 0.1%) while the NSE Nifty is trading lower by 9 points (down 0.1%). The BSE Mid Cap index is trading up by 0.2% while BSE Small Cap index is trading down by 0.2%. Gold prices, per 10 grams, are trading at Rs 29,430 levels. Silver price, per kilogram is trading at Rs 39,645 levels. Crude oil is trading at Rs 3,401 per barrel. The rupee is trading at 65.06 to the US$.

Telecom stocks are witnessing buying interest with Idea Cellular and Reliance Communications up more than 5% each, and Bharti Airtel at eight-year high on the BSE. MTNL, Tata Communications and Reliance Industries, too, were trading higher in the range of 1% to 3%.

The rally comes on the back of Reliance Jio Infocomm (RJio) decision to raise effective prices of most 4G tariff plans by 15-20% from 19 October. RJio's revision of tariffs, which includes a reduction in the validity period, is a positive for the telecom sector and will ease some pressure off the incumbents.

Pharma stocks are trading on a mixed note with Biocon Ltd & Orchid Pharma witnessing maximum selling pressure. As per an article in a leading financial daily, Dr. Reddy's Laboratories has initiated voluntarily recall of over half a million Famotidine tablets bottles from the US market as the drug failed impurities or degradation specifications.

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Reportedly, as many as 5,69,376 bottles of Famotidine tablets, 10 mg belonging to multiple lots packaged in 30-count, are being recalled nationwide.

The drug is an over-the-counter (OTC) product used to treat and prevent ulcers in stomach and intestines.

According to a notification put up by the US Food and Drug Administration (USFDA), the recall is being made under 'Class-III' classification, which is described as a situation in which use of or exposure to a violative product is not likely to cause adverse health consequences.

Speaking of blips, the BSE Healthcare Index has been going through more than a blip.

Price to Earnings Ratio (PE) of Top Pharma Companies

Domestic and export markets have both been challenging. Government regulations on branded generics have proved a roadblock in domestic markets. In developed markets, stringent USFDA checks on manufacturing plants along with price erosion in generics have eroded profitability.

There is a structural change taking place in the sector overall as to how business is done and will be done in the future. The pharma sector always traded at premium valuations in the past. It was labeled an 'evergreen' sector. Any small blip was considered an opportunity to buy.

It's important to understand every business has its ups and downs. This is where valuations can help. Here's what Kunal Thanvi, our research analyst, recently wrote about the sector:

  • "Pharma companies which can adapt to these changes will thrive in the long run. The uncertainties highlight it important to be stock specific in the sector. It is crucial to look for companies with the competence and staying power to overcome the challenges."

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Dr. Reddy's Lab share price was trading down by 0.4% at the time of writing.

Moving on to the news from engineering sector. BHEL share price was trading on an encouraging note after the company announced that the execution of 4000 MW Yadadri Supercritical Thermal Power Project has commenced with the issuance of revised letter of Intent by Telangana State Power Generation Corporation.

Significantly, valued at around Rs 204 billion, the order for Yadadri TPP, comprising five units of 800 MW supercritical sets, is not only the single-largest order for BHEL but also the highest value order ever placed in the power sector in India.

To be set up on Engineering, Procurement and Construction (EPC) basis by BHEL, the project is located at Damaracherla in Nalgonda district of Telangana.

Reportedly, the Yadadri project will be executed on fast track basis by BHEL in line with the company's strategy of focusing on a revival of held up projects and their speedy execution.

The Yadadri project will lead to a quantum jump in BHEL's executable outstanding order book and will help the company to enhance its growth momentum.

Notably, BHEL has contributed equipment for 86% of the coal-based power generation capacity installed in the state.

To know more about the company, you can access to BHEL's latest result analysis and BHEL stock analysis on our website.

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Oct 23, 2017 03:14 PM