Sensex Ends Day in Red; PSU Stocks Top Losers

Thu, 28 Dec Closing | Monish Vora, TM Team

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After opening the day flat, share markets in India witnessed volatile trading activity throughout the day and ended the day on a weak note. Losses were seen across most sectors with stocks in the PSU sector and stocks in the oil & gas sector, leading the losses. While stocks in the realty sector gained the most.

At the closing bell, the BSE Sensex stood lower by 64 points (down 0.2%) and the NSE Nifty closed down by 13 points (down 0.1%). The BSE Mid Cap index ended the day up by 0.1%, while the BSE Small Cap index ended the day up by 0.3%.

Asian stock markets finished mixed. As of the most recent closing prices, the Hang Seng was up by 0.9% and the Shanghai Composite was up by 0.6%. The Nikkei 225 was down by 0.6%. European markets were trading flat. The FTSE 100 was down by 0.1%. The DAX too, was down by 0.1% while the CAC 40 was flat.

The rupee was trading at Rs 64.09 against the US$ in the afternoon session. Oil prices were trading at US$ 59.74 at the time of writing.

In news from global financial markets. Minutes of the Japan central bank's last policy meeting released this week showed that a majority of policymakers agreed that central bank must persistently purse powerful monetary easing. But additional stimulus measures were unnecessary for now.

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The BOJ kept its policy steady as preferred by most of its policymakers at the two-day meeting that ended on 31 October 2017. But newly added member, Goushi Kataoka preferred more easing. Thus, complicating future efforts by the bank to withdraw stimulus.

A majority of the members were of view that extreme monetary easing only to achieve price goal could prevent monetary accommodation from producing intended policy effects. So taking additional monetary easing now would have more demerits than merits.

Most members felt that maintaining current policy was sufficient, though conceding it may take some time before firms more actively raise prices and wages, the minutes showed.

The minutes also noted that the effects and costs of buying risky assets like exchange traded funds (ETFs) must be looked from every angle even if the move had yet to distort market functions at this point.

The BOJ is lagging behind the US Fed and ECB in exiting the ultra-easy policy. But sooner or later, Japan will have to withdraw the easy money policy.

Moving on to news from stocks in the pharma sector. Dr Reddy's share price ended the day on an encouraging note after it was reported that the company has received final approval from the United States Food & Drug Administration (USFDA) for Sapropterin Dihydrochloride (100 mg) tablets.

These tablets are indicated to reduce blood phenylalanine concentrations in patients.

Dr Reddy's share price ended the day up by 1.3%.

Indian pharma companies catering to the US markets are breathing a sigh of relief. After being adversely affected by import bans and the suspension of new drug approvals from manufacturing facilities in the past three years, there has been a sharp pick-up in new drug approvals in FY17.

With an aim to lower the overall healthcare costs in the country, the US Food and Drug Administration (FDA) approved a record 763 generic drugs for the financial year ending 30th September. As per Mint Analysis, Indian pharma companies received 295 approvals accounting for 40% of the overall approvals during the year.

Meanwhile, the BSE Sensex will include Private sector lenders - IndusInd Bank and Yes Bank from December 18, while two pharmaceutical stocks - Cipla and Lupin will exit the index.

Pharma Weightage in BSE Sensex Going Down

With this change, the weight of the pharmaceutical industry in the index declines to a five-year low. Four drug makers, namely, Sun Pharma (1.7% weight), Dr Reddy's Laboratories (0.8% weight), Lupin (0.6% weight), and Cipla (0.9% weight) together had a 4% weight in the Sensex. With Cipla and Lupin dropping from the index, the pharmaceutical industry's weight would drop to 2.5%, assuming that the rest of the Sensex stocks remain in the index. And with this, only two pharma companies will represent the Sensex.

And here's a note from Profit Hunter:

Hindalco is among the top gainer in the Nifty 50 Index today - up 3.5%.

In our earlier note, we mentioned 200 as important resistance for the stock. In July 2014, the stock topped out at this level. It also reacted from this level several times from February to June 2017. But the stock finally broke above this level in July 2017. Once a stock breaks above such an important resistance level, it usually results in a big move.

So it rallied nearly 40% from that level to hit a life-time high of 278 in October 2017. It corrected for a while to hit a low of 229 earlier this month. Thereafter, the stock resumed it up move with healthy volumes.

Today, it made a new life-time high of 279 but immediately slipped lower. It looks like the stock has found resistance from its October high. Life-time highs usually act as a good resistance point.

So will Hindalco overcome this resistance level or will it have to struggle like it did near 200 levels. We'll keep a tab of it. Stay tuned...

Hindalco Near its Life-time High

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