Strong Finish to the Week

After trading on a positive note for most part of the day, buying activity intensified in the afternoon session leading the markets to close on a strong note. At the closing bell, the BSE Sensex closed higher by 275 points, the NSE Nifty finished higher by 92 points. The S&P BSE Midcap and the S&P BSE Small Cap finished higher by 0.7% and 0.6% respectively. Gains were largely seen in IT and metal stocks.

Asian markets finished mostly higher today after U.S. indices ended higher and oil prices hit their highest levels for this year. But a stronger yen continued to weigh on Japanese shares. The Shanghai Composite gained 1.73% and the Hang Seng rose 0.82%. The Nikkei 225 lost 1.25%. European markets are higher today with shares in France leading the region. The CAC 40 is up 0.52% while London's FTSE 100 is up 0.33% and Germany's DAX is up 0.22%.

Oil prices were trading at US$41.53 a barrel at the time of writing. The rupee was trading at 66.61 against the US$.

Hindustan Unilever Limited (HUL) has reportedly inked an agreement for the sale of its rice exports business to LT Foods Middle East DMCC for Rs 250 million. This primarily includes brands 'Gold Seal Indus Valley' and 'Rozana'. The brands registered a turnover of Rs 510 million in 2014-15. The company's decision to divest is in line with its strategy to exit non-core businesses, while continuing to drive its growth agenda in the core packaged foods business.

HUL had been struggling with high costs and an unmanageable workforce in the low-margin business. The company has been focusing on core packaged food and beverage brands with higher margins; it exited tea plantations, oil, fats and biscuit businesses over the past decade. Just two quarters ago, it sold its bread and bakery business under the Modern brand to the Everstone Group. Reportedly, HUL's food business accounts for less than a fifth of sales compared with parent Unilever, which gets about 45% of its global sales from foods and refreshments. The stock price of the company finished the day on a negative note (down 0.6%) on the BSE.

The company reported a revenue growth of 3% YoY during the quarter, while profits declined by 22% YoY (Subscription required) for the quarter ended December 2015. The last few quarters for FMCG companies have been troublesome. The earning performance of major companies have been sluggish. This had fizzled out the valuations of major FMCG stocks. FMCG stocks finished the day on a strong note with Nestle and Godrej Consumer leading the gains.

Shares of Torrent Pharma surged more than 4% today after it was reported that the company has successfully obtained the Establishment Inspection Report (EIR) from US Food & Drug Administration (USFDA) for its plant located at Dahej SEZ, in Gujarat. Prior to this approval, the plant has also received approval from EU Germany. It was set up to cater mainly to the regulated international markets such as US, Brazil, Germany etc. With the approval, this plant is now the third plant of Torrent Pharma to receive US FDA approval (Subscription Required), out of its 5 manufacturing units. According to reports, phase-I has an installed capacity of about 7,500 million tablets / capsules and 25 MT active pharmaceutical ingredient (API) per annum. Construction of phase-II will commence soon and once commissioned, the total capacity will increase to about 14,000 million tablets / capsules and 80 MT API per year.

In a parallel development, Aurobindo Pharma has received final approval from the USFDA (Subscription Required) to manufacture and market Dexmedetomidine Hydrochloride Injection, 200 mcg (base)/2 mL (100 mcg (base)/mL) single-dose vials. The product is expected to be launched post Q1 FY16-17.

Reportedly, the approved product has an estimated market size of US$59.1 million for the twelve months ended January 2016. This is the twenty seventh ANDA (including two tentative approvals) to be approved out of Unit-IV formulation facility in Hyderabad, India used for manufacturing general injectable products. Aurobindo now has a total of 244 ANDA approvals (209 Final approvals including 10 from Aurolife Pharma LLC and 35 tentative approvals) from the USFDA.

Sensex Up Over 100 Points
01:30 pm

After opening the day in the green, the Indian indices registered further gains in the post noon trading session. Sectoral indices are trading on a positive note with stocks from the IT, consumer durables and metal sectors leading the gains.

The BSE Sensex is trading up 102 points (up 0.4%) and the NSE Nifty is trading up 38 points (up 0.5%). The BSE Mid Cap index is trading flat while the BSE Small Cap index is trading up by 0.1%. Gold prices, per 10 grams, are trading at Rs 29,350 levels. Silver price, per kilogram is trading at Rs 38,410 levels. Crude oil is trading at Rs 2,775 per barrel. The rupee is trading at 66.66 to the US$.

Engineering stocks are trading on a mixed note with Jyoti Structure and TRF leading the losses. As per a leading financial daily, Crompton Greaves (CG) has won a significant order of US$ 35 million from PT PLN (Persero), the state-owned electricity company of Indonesia. The order is for manufacturing and installing 28 power transformers.

The company stated that its power transformers will be installed across PT PLN's transmission network, spread over multiple substations and power plants in the Java, Sumatra and Kalimantan provinces of Indonesia. The delivery period for the same is scheduled between May 2016 and March 2017.

The power transformers will be manufactured in CG's world-class manufacturing facility in Indonesia, which comprises a vertical winding machine, a vapor phase drying oven and a state-of-the-art 500kVA test facility.

It is to be noted that Crompton Greaves won this order due to its successful track record with PT PLN, backed by its technical expertise in manufacturing and supplying high-voltage transformers. Since 1993, CG has regularly provided PT PLN with power transformers in the range of 30 MVA (mega volt amp) to 500 MVA and voltage levels up to 500 kV (kilo volt).

On a separate note, one should note that Crompton Greaves recently demerged its consumer business. Post this development, the consumer business is expected to be listed separately in April. The company had in February 2015 announced it's decision to fully demerge its consumer products business (subscription required). The company's board had approved the demerger of the consumer products business into a separate listed company, Crompton Greaves Consumer Electricals Ltd. As per the company, the demerger will create better growth opportunities for its two large but significantly different businesses - power transmission and consumer products business such as fans, pumps and heaters.

Post this development, Crompton Greaves shares will reflect only its power business, which includes its power transmission and associated equipment business. Presently the scrip of the company is trading up by 0.9%.

Stocks of Indian pharma companies are also trading on a mixed note with Lupin and Glenmark Pharma witnessing maximum selling pressure. As per a leading economic daily, Glenmark Pharmaceuticals has been granted tentative approval by the United States Food & Drug Administration (US FDA) for its Lacosamide Oral Solution.

The company stated that it will market this product upon receiving final approval of its Lacosamide Oral Solution, 10 mg/mL ANDA (abbreviated new drug application).

Lacosamide Oral Solution is the generic version of Vimpat Oral Solution, 10 mg/mL of UCB, Inc. According to IMS Health sales data for the 12-month period ending January 2016, the Vimpat market achieved annual sales of approximately US$ 55 million.

Glenmark's current portfolio consists of 108 products authorized for distribution in the US marketplace and 61 ANDA's pending approval with the US FDA.

Presently the stock of Glenmark Pharmaceuticals is trading down by 2.9%.

Indian Markets Trade in the Green
11:30 am

After opening the day on a positive note, the Indian Markets have continued to trade in the green. Sectoral indices are trading on a positive note with stocks from the IT, metal and consumer durables sectors leading the gains.

The BSE Sensex is trading up 78 points (up 0.3%) and the NSE Nifty is trading up 29 points (up 0.4%). The BSE Mid Cap index is trading up by 0.1% while the BSE Small Cap index is trading up 0.2%. The rupee is trading at 66.56 to the US$.

Stocks in the telecom sector are trading on a mixed note with ADC India Communications and ITI leading the gains. As per Cellular Operators Association of India (COAI), GSM mobile operators added 72.5 lakh subscribers in the month of February. Post this, the overall user base in telecom space now stands at 768 million.

Bharti Airtel led the pack with maximum subscribers joining its network in the month of February. The company added 29 lakh customers to take its total user base to 248 million with 32.4% market share at the end of February. Vodafone, the country's second largest mobile operator, added 20.3 lakh subscribers to take its overall base to 196 million with 25.6% market share.

Idea Cellular subscriber base increased by 14.63 lakh to take its overall base to 174 million, with a market share of 22.7%. Aircel added 6.10 lakh subscribers and its base increased to 86 million, whereas Telenor added 2.50 lakh customers to take its base to 51 million at the end of February. State-run MTNL witnessed a growth of 10,704 subscribers, taking its overall base to 35.5 lakh.

However, Videocon Telecom lost 17,917 subscribers during the period and its base decreased to 67.3 lakh.

After been badly hit in 2012, the telecom sector has bounced back with a revival in subscriber additions. However, do telecom sector fare well on the investment front? Click here to find out (subscription required).

Stocks in the engineering space are trading on a mixed note with TRF leading the losses and Bharat Electronics leading the gains. In another news update, Blue Star is reportedly planning to build air conditioners (ACs) with air purifiers in collaboration with companies based in China and the US. Further, the company is also seeking technology from IIT Madras to come up with such products, which will be the first of its kind in India.

It shall also be noted that the company is setting up green-field plants for AC (air conditioners) and commercial freezers in Jammu and Sri City in Andhra Pradesh. The new facilities will add about 10 lakh units of capacity by 2020 to the company's existing 3.5 lakh unit capacity per annum.

The company's management stated that Blue Star is clocking a 12% growth rate, and enjoys a 10% market share (in terms of value) in the room AC segment, and 9.5% in terms of volumes.

Also, on a separate note, the company wants to garner a healthy share in the air cooler market in India with its new brand Windus Air coolers. For this, the company has started test marketing in Gujarat, Delhi and Telangana with four models.

Blue Star is India's leading central air-conditioning and commercial refrigeration company. The above developments point towards a pick-up in the financials for Blue Star in the near future. To know our view on the stock of the company, read our analysis of the third quarter results (subscription required).

Presently the stock of Blue Star is trading up by 0.8% on the BSE.

Positive Start to the Day
09:30 am

Barring Japan, major Asian stock markets have opened the day on a positive note. The stock market in China and Hong Kong are trading higher by 1.9% and 0.7% respectively. Major indices in Europe and US ended their previous session in green. The rupee is trading at 66.88 per US$.

Indian stock markets have opened the day in green. The BSE Sensex is trading higher by 47 points (up 0.2%) and NSE Nifty is trading higher by 17 point (up 0.2%). Both, BSE Mid Cap and BSE Small Cap are trading higher by 0.2% and 0.3% respectively. Major sectoral indices have opened the day in green with stocks from telecommunication and information technology sector are witnessing maximum buying interest.

As per an article in Livemint, Biocon has entered into a deal with Mexico's Laboratories PiSA SA de CV. to make its version of a recombinant human (rh)- insulin. The drug will be launched in the US markets. The demand for generic rh-insulin in US accounts for over 40% of the global market of US$ 5 bn.

According to the deal, Biocon will supply the active ingredient which is the main raw material, while PiSA will make the finished drug at its Mexico's facility.

Further, Biocon will also be solely responsible for the clinical developments, regulatory approvals and sale of the product in the US. Both the companies will share the costs for development of drug and Biocon will also be entitled for some upfront payment. The said drug is expected to enter the US market in 2020. Given stringent regulations in the developed markets, one needs to keep tab on the progress the company makes in development of this drug.

In another news update, Tata Motor's new chief executive and managing director, Mr Butschek stated that he is set to initiate crucial operational changes coupled with brand repositioning to get back the company on track. Further, he intends to make the company leaner and flexible to help it to respond faster to the market changes than it has historically.

Reportedly, the company is keen to gain the ground it lost to rivals like Mahindra & Mahindra and Honda in recent years. In the April-February period the company reported a fall of 4% in domestic car, utility vehicle and multi-purpose vehicle (MPV) sales, even as the industry grew by about 8%. Its share has collapsed to 5.4% compared to 14% reported four years ago. The figures have been low despite the launch of three new products in the preceding six months.

Why Innovation is India's Priority

Where does India rank on the innovation front? Initiatives by government like the 'Make in India' and 'Digital India' might seemingly lead to a satisfactory answer for this. However, the numbers tell a different story.

An article in Livemint observes that India has continued to perform poorly on the innovation front. This can be said as the international patent applications filed from India has dropped in 2015 as against a year ago.

As per the latest figures released by the World Intellectual Property Organization (WIPO), India filed 1,423 international patent applications in 2015. This was as against 1,428 applications filed in 2014.

While the fall witnessed is marginal, it has brought much concerns. This is because while India saw a fall, other Asian countries such as China, South Korea and Japan have witnessed a notable increase in their international patent applications.

To be number specific, Japan has filed 44,235 international patent applications in 2015 as against 42,381 in 2014. China filed 29,846 applications in 2015 as against 25,548 a year ago. Further, South Korea filed 14,626 applications in 2015 than 13,117 in 2014.

From the aforementioned numbers, it can be seen that the numbers for patent filings in India has fallen. Not only that, but the application filings in India are far more lesser than the other Asian countries.

The factor responsible for India's underperformance, as per WIPO, is the Innovation policy. The organisation stated that the innovation policy in India is a complex matter and it doesn't produce immediate results.

The patent grant system in India is rather a slow process. Moreover, in the absence of a concept like the 'Patent term adjustment' followed in the US, filing a patent in India can diminish the prospects of a good return in good time.

As per Wikipedia, 'A patent application is a request pending at a patent office for the grant of a patent for the invention described and claimed by that application.'

Hence, a lesser number of patent applications mean less innovations made in India. And this is concerning as patent filings are a measure of the spread of science and technology in a country. Also, as per WIPO, 'Global intellectual property applications, like those of patents, trademarks and industrial designs, provide a good indication of the incidence and location of innovation'. In fact, India's performance has remained flat in patent applications filing in the past three years. And there is an urgent need for this to change for the development of the nation.

We believe that innovation can play a big role in the India of tomorrow. Also, for 'Digital India' and 'Make in India' to be successful, we first need to instill a robust culture of innovation in India. For this, innovation should be an area of focus with right investment policies. Further, Indian companies must increase their attention towards research and development (R&D) processes. Also, there should be advancement in education policy that nurtures innovative thinking.

The need of the hour is to foster innovation. India can't afford to merely catch up. It needs to drive its intent towards making innovation a key priority.