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Sensex & Nifty Flat; Healthcare & Auto Sector Opens in Green
Wed, 21 Dec 09:30 am

Asian markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.67% while the Hang Seng is up 0.46%. The Nikkei 225 is trading up by 0.14%. Stock markets in the US and Europe closed their previous session on a firm note.

Meanwhile, Indian share markets have opened the day on a flattish note with a positive bias amid firm global markets. The BSE Sensex is trading higher by 79 points while the NSE Nifty is trading higher by 24 points. The BSE Mid Cap index and BSE Small Cap index both opened the day up by 0.2% & 0.3% respectively. The rupee is trading at 67.90 to the US$.

Barring FMCG stocks, all sectoral indices have opened the day on a positive note with realty, healthcare and auto stocks witnessing maximum buying interest.

As per an article in The Financial Express, Retail sales in the auto industry fell prey to the government's demonetisation measure even as November wholesale deliveries reported growth for some manufacturers who have a waiting on certain new models.

However, Demonetisation has driven up discounts for cars, which are running anywhere between 10% and 15%. This is making December a good time to buy a car. Dealers are also looking to clear their inventory before the year is out are willing to fork out more discounts.

Maruti Suzuki and Hyundai have both increased discounts across most models including popular ones like the Elite i20. Even Maruti's popular compact sedan, Dzire, now attracts a discount of Rs 10000- Rs 11000, twice the earlier levels of Rs 5000 - Rs6000.

Reportedly, Hyundai sold a record 50,000 vehicles during October. However, demonetisation has resulted in fall in footfalls at dealerships by about 30-40%. Other manufacturers like Mahindra and Mahindra (M&M), Renault, Honda have resorted to the same strategy for pushing the inventory in the market.

One Month On, The Biggest Losers of Demonetisation

The chart above illustrates the various BSE sectoral indices that have been hit the hardest over the last month.

The luxury car market has grown leaps and bounds and many luxury car brands are in India today. The market has never faced a year declining sales, until now. Most vehicles in India are financed. Nevertheless, demonetisation has made its impact felt. Speaking of demonetisation impact in auto sector, Kunal Thanvi, our auto sector analyst is of the opinion that even if sales take a big blow this year, the auto growth story won't break down. Here's an excerpt from the article he wrote recently:

"Typically, in the month after the festive season, automakers suspend production for a few days to carry out factory maintenance. But this time around, the shutdowns will be longer, a few weeks perhaps. So is all this enough to abandon auto stocks? No.

Individuals and businesses will buy cars, two-wheelers, and trucks irrespective of demonetisation. A one-year hit to profitability won't change the long-term earnings power of fundamentally strong auto firms."

Moving on to the news from stocks in pharma sector. Sun Pharmaceutical announced that it has completed the acquisition of 85.1% stake in Russia-based JSC Biosintez. JSC Biosintez is a Russian pharmaceutical firm, engaged in manufacture and marketing of pharma products in Russia. It focuses on the hospital segment and reported annual revenue of about US$52 million for 2015.

In November this year, Sun Pharma had announced the execution of definitive agreements by its wholly owned subsidiary for the acquisition of JSC Biosintez.

This acquisition is consistent with Sun Pharma's philosophy to invest in strategic emerging markets. This transaction will give the access to local manufacturing capability across multiple dosage forms in Russia. Notably, the Russian pharma market recorded sales of US$10 billion in the twelve months ended September 2016, according to IMS Health.

The M&A activity in the Indian pharma space has been on the rise in recent times. At the end of the day, whether the company is able to derive value from the acquisitions and augment the overall performance will be the key thing to watch out for going forward.

Sun Pharma's share price opened the trading day up by 0.4%.

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Mar 22, 2018 (Close)