Indian Indices Open on a Positive Note; Realty & Auto Stocks Lead

Wed, 12 Dec 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 0.2% while the Hang Seng is up 1.6%. The Nikkei 225 is trading up by 1.9%.

Back home, India share markets have opened the day on a positive note. All sectoral indices have opened the day in green with realty stocks and auto stocks witnessing maximum buying interest.

The BSE Sensex is trading up by 240 points while the NSE Nifty is trading up by 75 points. The BSE Mid Cap index opened the day up by 1.1% while BSE Small Cap index opened up by 1%.

The rupee is currently trading at Rs 72.13 against the US$.

The rupee staged a late rebound after plunging 110 paise in early trade Tuesday but still ended 53 paise lower against the US dollar following RBI Governor Urjit Patel's shock exit coupled with the loss of the ruling BJP in key state elections.

Besides, the trading pattern in the forex market was impacted by massive sell-offs in domestic equities as investors panicked over exit polls suggesting the Congress giving a tough fight to the ruling BJP in state elections.

Every year before the Indian General Election, the stock market has bordered on the extreme. Two of these elections have also coincided with one of the biggest stock market corrections in recent history.

Why this volatility though? Why should elections matter to the stock markets? Investors, both domestic and foreign, expect stability at the central government level. A stable government will be in a position to implement a clear roadmap for the future.

On the other hand, a divided mandate could mean policy paralysis and roadblocks. Markets speculate on these factors.

Also, certain sops are announced before the elections to appease the masses. That too has an indirect effect on listed companies.

Should investors be mindful of these factors? Does this one-year volatility even matter for long-term investors?

As per Research Analyst, Girish Shetty, it ideally shouldn't but the year can certainly throw up a lot of opportunities if there is an irrational reaction to high-quality safe stocks.

Speaking of stock markets, with the state and general elections ahead, market participants expect the stock markets to remain volatile. In our latest episode of Indian Stock Market Podcast, Rahul Shah talks about his mantra to ride out the volatility in times like these. Listen in... visit SoundCloud, iTunes or Stitcher.

Moving on to the news from the pharma space, Unichem Lab is witnessing buying interest today as the company reported that it has received a tentative nod from the US health regulator for generic Tadalafil tablets used for treatment of erectile dysfunction.

Unichem Lab has opened the day up by 3%.

In another news, Aurobindo Pharma is also in focus today as the company's wholly owned subsidiary - Helix Healthcare B.V, Netherlands, has entered into an agreement with Shandong Luoxin Pharmaceutical Group, China (Luoxin) to establish a joint venture (JV) company in China with manufacturing facilities to manufacture nebuliser inhaler and other products for China, US and EU markets.

To know more about the company, you can access Aurobindo pharma Q2FY19 result analysis and Aurobindo pharma Annual report on our website.

Speaking of pharma sector, note that the BSE Healthcare Index has been on a roller coaster ride in the past few years. The period from 2012 to 2015 saw the index go up more than three times.

And since then it has been a painful ride downwards, as can be seen from the chart below:

The Roller Coaster Ride of the BSE Healthcare Index

As we wrote in one of our editions of The 5 Minute WrapUp...

• Pre-2015, pharma companies enjoyed a fairytale ride in the US market. Low labor costs, good chemistry skills, along with efficiency, ensured Indian companies could copy innovator drugs to make generic drugs at a fast pace.
  
  The generic business had lucrative margins for all major pharma players. But the party did not last long. In the quest to supply drugs quickly, they compromised on quality at their manufacturing facilities.
  
  No wonder, the US regulatory authority (USFDA) took strict action. Sun Pharma received a warning letter for its Halol manufacturing facility in 2015. It was like a bolt out of the blue. Since then, the downward spiral began and has continued till date.

We believe that pharma companies that invest in creating a pipeline of complex generics or building competencies in alternative dosage forms are better equipped to tackle the changing dynamics in the US generics market as well as in the overall industry.

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

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