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Sensex Ends Day in Green as BJP Seen to Win Gujarat and HP Elections
Mon, 18 Dec Closing | Prasheel Vartak, TM Team

After opening the day deep in red, share markets in India made a smart recovery and witnessed buying activity throughout the day to end on a positive note. Gains were seen across most sectors with stocks in the metals sector and stocks in the auto sector, leading the gains.

At the closing bell, the BSE Sensex stood higher by 139 points (up 0.4%) and the NSE Nifty closed up by 55 points (up 0.5%). The BSE Mid Cap index ended the day up by 0.8%, while the BSE Small Cap index ended the day up by 0.5%.

Asian stock markets finished in green. As of the most recent closing prices, the Hang Seng was up by 0.7% and the Shanghai Composite was flat. The Nikkei 225 was up by 1.5%. European markets too, were trading on a positive note. The FTSE 100 was up by 0.4%. The DAX was higher by 1.2% while the CAC 40 was up by 1.1%.

The rupee was trading at Rs 64.21 against the US$ in the afternoon session. Oil prices were trading at US$ 57.7 at the time of writing.

Market sentiment today was driven by the Gujarat and Himachal Pradesh (HP) elections.

At the time of writing, final voting trends showed BJP leading Gujarat polls with over 100 seats. The same is the case in HP, where BJP is leading polls with 44 seats.

This was not the case earlier today when the opposition Congress was leading the vote count, with 85 seats. At that point in time, BJP was ahead only in 79 seats.

BJP needs a total of 92 seats to retain power in Gujarat and 35 seats to retain power in HP.

There are high stakes involved as the outcome of this election would determine the direction of the country's reforms and policies in the runup to the 2019 elections.

The outcome is also important for the Indian stock markets. As Ankit writes in one his editions of Equitymaster Insider..."stock market valuations in India seem to reflect what I call the 'Modi market premium'". You can read his entire note on this topic here (requires subscription).

Moving on to news from stocks in the pharma sector. Dr Reddys lab share price closed the day up by 1% after clarifying that news reports mergers & acquisitions (M&A) activities of the company are purely speculative and it has not made any official statements related to the said matter of the company vying to buy out bankrupt Orchid Pharma.

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Dr Reddy's lab share price opened the day lower by over 1.5% amid news that the company was a Frontrunner to buy out bankrupt Orchid Pharma Ltd. as it seeks to expand their capacities.

One shall note that, a key player in injectibles and active pharmaceutical ingredients (API) in its heyday, Orchid has received interest from 7-8 companies including international private equity funds and stressed asset buyout firms.

Lakshmi Vilas Bank referred Chennai-based Orchid Pharma to the National Company Law Tribunal for defaulting on repayments to the tune of Rs 500 million.

Further, the company owes more than Rs 35 billion to a group of lenders led by the State Bank of India. It was on the Reserve Bank of India's second list of 28 defaulters that had to be referred to the NCLT before 31 December if no resolution was found by 13 December.

However, the assets of the company are good. Orchid Pharma has two API manufacturing facilities in India and three formulation manufacturing sites in India. These are all approved by the US Food & Drug Administration, the UK's Medicines and Healthcare Products Regulatory Agency and other regulators and agencies. All these demonstrate the potential of these plants, the reports noted.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

'Safe Haven' Pharma Sector in Decline Since 2 Years

The sector has faced great volatility over the years.

We had written about the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

  • Over the past few years, risk in the US markets has increased. The US Food and Drug Administration has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

The list of pharma sector woes is long. So, is there light at the end of the tunnel? Girish Shetty, our research analyst thinks there is.

As per him, it doesn't make sense to paint all pharma stocks with the same brush. The leaders of the industry will certainly survive this phase. There are interesting, niche pharma stocks that are worth your attention.

Facing pricing pressures in the domestic and export markets, currency fluctuations, as well as manufacturing issues related to their plant, there is a transformation happening in the overall sector as to how business is done and will be done in the future.

And here's a note from Profit Hunter

The Nifty 50 Index traded on a volatile note on back of Gujarat and Himachal Pradesh election results. The index opened 70 points gap down and plunged to hit a low of 10,075 (-258 points) in its very first minute. But the bulls took over the charge from there and index recovered sharply to trade in the positive territory. It finally ended today's session 55 points up at 10,389.

After so much of volatility, the Nifty did not go below the 10,000 mark. The level which acted as a strong resistance on the way up is now acting as a strong support. We have mentioned this several times in the past that the 10,000 level remains a strong support for the index as per the change of polarity principle. Our rollover report published at the profit hunter pro (subscription required) also suggested that it would be difficult for the bear to push the index below the 10,000 mark.

Now the index is 100 points away from its life high. So with political event back of us, can we now see a new life-time high in the sessions to come?

Nifty 50 Index Trades Volatile
Nifty 50 Index Trades Volatile 

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