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Asian equity markets were lower in morning trade, following an overnight decline in US equities as US Federal Reserve Chair Janet Yellen prepares to weigh in on the path for interest rates. The Nikkei 225 is off 0.14% while the Hang Seng is down 0.45%. The Shanghai Composite is down 0.38%. Stock markets in Europe also closed their previous session on a negative note.
Meanwhile, Indian share markets have opened the day on a flat note. BSE Sensex is trading lower by 72 points and NSE Nifty is trading lower by 20 points. Meanwhile, S&P BSE Mid Cap and S&P BSE Small Cap are trading lower by 0.2% & 0.1% respectively.
Barring realty stocks, metal stocks and oil & gas stocks, all the sectoral indices have opened the day in red with FMCG sector and information technology sector witnessing maximum selling pressure. The rupee is trading at 66.74 against the US$.
Banking Stocks opened the day on a mixed note with DCB Bank and Axis Bank leading the gainers. According to an article in a leading financial daily, it was reported that ICICI bank will hit the overseas debt market with a US$ 500-million dollar-denominated bond issue. The bench market issue will be sold through the Dubai International Finance Centre branch of the bank, and the lead-managers have given a price guidance of 1.55% over the US treasury.
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The issue is part of ICICI Bank's US$ 7.5 billion global medium-term notes program. Global rating agencies S&P and Moody's have rated the proposed senior unsecured notes at BBB- and Baa3 respectively.
Moody's Investors Service said the Baa3 rating to the proposed RegS notes issued under its USD7.5 billion MTN program will have a maturity of 5.5 years and will be listed on the Singapore Stock Exchange. Moody's has also given a positive outlook on the ratings.
In another development, the Finance Ministry has advised state-owned banks to prepare a list of their non-core assets and look at disposing them at opportune time as part of capital raising exercise.
The move will not only help them raise the much needed capital for growth but also sharpen their focus on the core business. Last month, the board of IDBI Bank also approved dilution of stake in some non-core businesses to shore up capital base.
Reportedly, PSB's will require 1.8 trillion in additional capital over a period of four years ending March 2019.
Rising bad loans and poor credit offtake have marred have marred the performance of most banks for several quarters now. Niche NBFCs, on the other hand, have cannibalized on the market share of bigger banks, due to their unwillingness to lend.
In addition, banks need to invest in technology and automation to adapt their risk controls to digital payments. Such investments are practically impossible for the smaller players in the sector and expose them to huge risks. Consolidation of the banking sector is therefore inevitable.
Of the 46 commercial banks, only two figure among the world's 100 largest banks.
The top 10 banks contribute around 60% share of the total credit.
ICICI bank share price began trading down by 0.2%.
Moving on to news from stocks in pharma sector. According to a leading financial daily, India's largest pharmaceutical firms are looking to convince US President Donald Trump that his promise to lower pharmaceutical drug costs should take priority over his vow to make sure the medicines are made in America.
Indian Pharmaceutical Association (IPA), whose members include companies such as Sun Pharma, Dr Reddy's, Lupin, Cadila Healthcare, Torrent Pharma are worried that the Trump administration (Subscription Required) might get tough on issues like intellectual property rights, or invoke the Trade Facilitation and Trade Enforcement Act of 2015 to curtail imports of medicines from India.
The IPA has sought the Indian government's intervention for faster clearances of their drug applications, quicker response of remedial actions after USFDA's warning letters and faster resumption of drug supplies.
As per the reports, IPA also fears that the inspection by the USFDA might only increase in the coming days as according to its data the US regulator has managed to inspect only 30% of the total FDA approved facilities in India. Going by the statistics in the last six years FDA has consistently increased its scrutiny of Indian firms.
Indian drug companies have built their fortunes by making US one of their key export markets. Currently, over 40% of the four top Indian drugmakers' revenues come from the US market. However, in the past few years companies have come under FDA scrutiny for non-compliance of good manufacturing practices. Players like Wockhardt have stopped most of their exports to US after repeated FDA bans. Flagship units of Sun Pharma and Dr Reddy's Lab too are facing regulatory scrutiny.
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