The Indian markets have started on a choppy note. The benchmark indices opened below the breakeven mark but managed to bounce back to the dotted line. However, they have not managed to hold on to their gains since then. Asia is currently trading a mixed bag with Hong Kong (down 0.9%) leading the pack of losers, while Japan (up 0.6%) is in the green. The US markets closed lower by 0.5% yesterday.
Currently, in India, heavyweights from the BSE-Sensex are trading a mixed bag with auto stocks leading the pack of gainers. However, banking majors bore the brunt of selling activity. The BSE-Sensex is trading lower by 55 points, while the NSE-Nifty is down by 15 points. Selling interest is also being witnessed among mid and small-cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading lower by 0.3% and 0.2% respectively. The rupee is trading at 46.70 to the US dollar.
FMCG stocks have opened the day on a mixed note. Gainers here include Godrej Consumer and Marico, while HUL is in the red. As per a leading daily, FMCG giant HUL will pay its parent, Unilever, royalty on the use of some brands at the rate of 1% of net sales. Unilever holds the trademark of these brands. While HUL had signed a technical collaboration agreement with Unilever more than a decade back, so far it did not involve payment of any trademark royalty. Brands owned by Unilever and licensed to HUL include Lux, Lifebuoy, Ponds, Vaseline, Dove, Surf, Close-Up, Sunsilk, Brew, Axe and Clinic. In our view, the practice of paying royalty to the parent for using its trademarks is not unusual in the FMCG sector. Companies such as Nestle and Colgate Palmolive pay royalty between 3% and 5% for using their parent's trademarks.
Pharma stocks have opened the day on a positive note. Gainers here include Dr. Reddy's and Cipla. As per a leading business daily, Cipla is in talks with German drugmaker Boehringer Ingelheim (BI) for the supply of two generic drugs 'Telmisartan' and 'Amlodipine'. BI sells Telmisartan under the brand Mircadis with sales of over US$ 1.5 bn annually. Its patent will expire in 2014. Cipla is also discussing similar deals with other global pharma majors. That includes Pfizer, which lost the patent for Amlodipine in 2007. It may be noted that global pharma giants are entering into alliances or acquiring Indian companies to access low-cost generics and scale up their business in emerging markets. The patent on several of their top selling drugs are set to expire in 2 to 3 years. In our view, if Cipla's deal with BI goes through, it would be unique given that the German pharma giant still holds the patent for Telmisartan.