Sensex Opens Higher; Automobile Stocks Gain the Most

Tue, 19 Dec 09:30 am

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Asian indices are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.04% while the Hang Seng is up 0.84%. The Shanghai Composite is trading up by 0.53%. Wall Street hit record closing highs on Monday as optimism increased about the likelihood of lower corporate tax rates as the Republican tax bill moved closer to passage.

Back home, India share markets have opened the day on a firm note. The BSE Sensex is trading higher by 143 points while the NSE Nifty is trading higher by 34 points. The BSE Mid Cap index opened up by 0.6% while BSE Small Cap index opened the day up by 0.7%.

All sectoral indices have opened the day in green with automobile stocks and consumer durables stocks witnessing maximum buying interest. The rupee is trading at 64.11 to the US$.

Pharma stocks opened the day on a mixed note with Aurobindo Pharma and Orchid Pharma leading the gains. As per an article in a leading financial daily, Dr. Reddy's Laboratories Ltd will pay US$5 million to resolve US claims that the Indian company sold prescription drugs in the United States in packaging that was not tested for child safety.

The settlement was disclosed in documents filed in federal court in Trenton, New Jersey, over a year after the US Consumer Product Safety Commission voted to refer a case involving the drugmaker to the US Justice Department.

The Justice Department alleged that in 2011, Dr. Reddy's engineers concluded that the packaging for five types of drugs that the company manufactured and imported for sale would not pass tests required in the United States to prove child resistance

The Justice Department in a lawsuit said that instead of notifying the CPSC or the public that its products put children at risk, the company quietly began altering its packaging while continuing to sell products in untested packaging.

The lawsuit said Dr. Reddy's violated the Consumer Product Safety Act by distributing drugs that did not comply with a law aimed at protecting children from accidentally ingesting medicines by requiring those drugs to be in special packaging.

Speaking of pharma sector, 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."

So, what is key to identifying potential multibagger stocks? How does one pick them at the right time and ride them to their full potential? How many multibaggers do you really need to achieve the big riches that you desire?

Most importantly, are there any stocks right now that could turn out to be multibaggers? Click here to know everything that you need to know right now about mutlibagger stocks...

Dr. Reddy's share price opened the day up by 0.8%.

Moving on to the news from cryptocurrency space. CME Group's new bitcoin futures fell on their first day of trading, as the Chicago-based exchange giant pushed forward into the rapidly expanding market for cryptocurrency derivatives.

Reportedly, the volumes were in the tens of millions of dollars in the first 12 hours of trading, as warnings about the risks of bitcoin sounded ever louder.

A total of 751 contracts - each of them for five bitcoins - had been traded on CME's January futures contract as of 1417 GMT, at US$ 18,970 per contract, just over 13 hours after their introduction, making a total notional value of around US$70 million.

The CME bitcoin front-month futures contract opened higher at US$20,650 but dropped 6% within the first half hour of trading.

The contract was last at US$18,960, some way off the US$19,500 reference price set by the exchange for the January contract.

The reference price, from which price limits are set, is US$19,600 for the February contract, US$19,700 for March and US$19,900 for June, according to CME.

Notably, the launch of futures by the world's biggest derivatives exchange operator, and by its rival Chicago-based exchange (Cboe) Global Markets a week earlier, had been hailed by many as the moment that bitcoin reached the investment mainstream.

That view has helped send bitcoin soaring even higher than before in recent weeks, having almost doubled in price since the start of December, when it was trading at less than US$10,000.

Time travel to 2013 and Bitcoin was trading at a mere US$100. In fact, even during August this year, the cryptocurrency traded at around US$4,000 levels, as can be seen from the chart below:

Price Movement of Bitcoin from August 2012 to August 2017

Fast forward to today, Bitcoin is seen trading at an all-time high of around US$17,000.

Bitcoin and cryptocurrencies are a curious bunch. They have no central bank backing and have not yet been regulated. Yet, these seem to have found favour among a large number of people, with demand growing every day. There are over 800 cryptocurrencies in existence today, with new ones being added to the list every day.

While the world of digital currencies is intriguing, it can get very confusing for the layman. Our team member, Ankit Shah, Research Analyst, has decided to study cryptocurrencies and help our readers understand them.

Here's Ankit's take in a recent edition of Equitymaster Insider:

• I've been studying and tracking bitcoin for a while, and though I still understand very little about it, I believe that it is a revolutionary technology that could transform a range of businesses and money itself. It would be naive to dismiss it as a passing fad.
  
  I want my readers to be on top of the biggest megatrends in the global economy. So, you can expect to hear about bitcoin whenever there is an important update or insight.

Ankit has also released a premium guide for Equitymaster Insider subscribers, titled Bitcoin 101 which contains everything you need to know about bitcoins and other digital currencies.

If you haven't been receiving Ankit's insights, get on the Insider's list now.

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

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