Late buying fuels indices

Indian equity markets started the day on a choppy note and remained volatile for most of the trading session before closing in the green on back of heavy buying activity in late afternoon. Sentiments remained jittery ahead of the central bank's key policy meeting this week. Investors are awaiting on the sidelines the outcome of today's Federal Reserve Open Market Commitee (FOMC) meet that will help determine the pace and quantum of stimulus tapering by the US central bank. Realty, Banking and FMCG sectors led the pack of gainers. While the BSE Sensex closed higher by 158 points, the NSE-Nifty closed higher by 49 points. BSE Mid Cap and the BSE Small Cap closed on a positive note.

As regards global markets, Asian indices closed in the green. European indices have opened in the green. The rupee was trading at Rs 63.1 to the dollar at the time of writing.

According to a leading financial daily, Dabur India has forayed into specialized male-grooming segment by launching OxyLife Men Creme Bleach. The company has also entered into the professional male grooming market with the launch of a salon and parlour pack of OxyLife Men Creme Bleach. OxyLife Men Creme Bleach will be available in a 15 gm pack priced at Rs 40, and the 150 gm parlour pack will be priced at Rs 125. Male-grooming market in India is estimated at about Rs 38 bn, and the segment is expected to witness a 21% annual growth over next three years. While Dabur is the latest fast moving consumer goods company in India to enter the segment, companies like Nivea, Garnier, HUL, Godrej and apparel maker Raymond have been selling male grooming products for quite a few years now.

According to a leading financial daily, OVL, the overseas arm of state-owned ONGC in collaboration with Royal Dutch Shell will buy the 35% stake in block BC-10, known as Parque das Conchas, that Brazil's Petrobras had planned to sell to Sinochem. While the Indian firm will pick up 12.08% stake, the remaining 23% will go to Shell. In a first by an Indian firm, OVL has exercised its pre-emption rights to block China's Sinochem Group from buying 35% interest in a Brazilian oilfield for US $1.54 bn.

Indian share markets stagnate
01:30 pm

Indian share markets continued to trade in a narrow range-bound manner in the post-noon trading session. Majority of the sectoral indices are trading in the green with realty, FMCG and pharma stocks being the biggest gainers. Only Metal, auto and IT are among the few stocks trading in the red.

BSE-Sensex is up 33 points and NSE-Nifty is trading marginally up. BSE Mid Cap is trading up 0.2% and BSE Small Cap index is trading up 0.1%. The rupee is trading at 63.1 to the US dollar.

Mining stocks are trading mixed, with Coal India Ltd (CIL) and Metals and Minerals Trading Corporation of India Ltd. (MMTC) being the major gainers and Gujarat NRE Coke and National Mineral Development Corporation (NMDC) being the major losers. As per a leading financial daily, CIL has identified 126 projects having an estimated capacity of 438 m tonnes to be implemented in the 12th Five-Year Plan (2012-17). As per the company, 60 of these projects will contribute around 88 m tonnes in the terminal year 2016-17 of the Five-Year Plan. Out of the 126 projects, preliminary reports for 78 have already been formulated whereas four projects having an estimated capacity of 12.5 m tonnes have been sanctioned. CIL will operate on the projects in the mine-develop-operate (MDO) mode. In FY13, CIL reported a 3.8% rise in coal production to 452.2 m tonnes. CIL stock is trading up by 1.3%.

As per a leading financial daily, the government has raised the custom duty on gold and silver jewellery by 5% to 15%. The government had earlier increased the import duty on primary gold and primary silver to 10%. This had led to diminished duty differential between bullion and jewellery hurting the domestic jewellery industry as imported jewellery is machine-made and cheaper. Also after the Reserve Bank of India's 80:20 norms, under which 20% of the imported gold has to be re-exported, traders were exploring the possibility of importing jewellery to circumvent the rule. The latest upward revision on jewellery imports is expected to plug the loophole and shield the domestic jewellery industry.

Indian indices remain range bound
11:30 am

After a firm opening, the Indian stock markets are trading in a range. All sectoral indices except Auto and Power are trading positive. The BSE-Sensex is up 29 points while the NSE-Nifty is trading up just 6 points. The BSE Mid Cap and BSE Small Cap indices are trading up by 0.4% and 0.5% respectively. The Rupee is trading at 63.1 to the US Dollar.

Indian Pharma stocks are trading mixed today. Panacea Biotech and Wockhardt Ltd are among the top gainers. Glenmark Pharma and Sun Pharma are amongst the losers. Dr. Reddy's Laboratories' has announced that United States Food & Drug Administration (USFDA) has approved sale of bio-equivalent generic version of Vidaza - Azacitidine for injection of 100 mg/vial. Vidaza is Celgene Corp's anti-cancer drug. Azacitidine is used to treat certain types of bone marrow cancers and blood cell disorders.

As per the company, the launch of product in the market is planned in the near-term. According to IMS Health the Vidaza(R) brand had U.S. sales of approximately US$ 379 m for the last 12 months ending July 2013. This is a substantial approval for the company as it will be a stepping stone for Dr. Reddy's for driving growth through niche products. Dr. Reddy is trading 2% up today.

Most of the IT stocks are trading higher today. Wipro and Tata Consultancy Services (TCS) are among the top gainers. The legal issues facing Tech Mahindra regarding the Satyam merger refuses to go away. Nearly five years after India's biggest corporate scam broke out at erstwhile Satyam Computers, a US court has ordered fresh proceedings into charges that the IT firm had fraudulently induced a US firm Venture Global Engineering (VGE) into a partnership. Satyam was acquired by Tech Mahindra and its entire business was integrated with the new owner earlier this year.

The latest ruling by a US Appeals Court follows an earlier direction issued by a Districts Court of Michigan, which had dismissed claims made by Venture Global Engineering (VGE) against Satyam with regard to a joint venture. In its order dated September 13, the Appeals Court has reversed the judgment of the district court and has ordered further proceedings into the matter. In its appeal, VGE and the Larry J Winget Living Trust alleged that Satyam Computers had "induced" them to form a joint venture by "misrepresenting its financial stability and general suitability as a business partner." Satyam had argued at that time that VGE should have brought their claims during arbitration in 2005 itself. The case will now be heard again. Tech Mahindra is trading up by 1%.

Indian share markets open firm
09:30 am

Asian stock markets have opened the day on a mixed note with Japan (up 1.8%) and Singapore (up 0.6%) leading the gains. However, markets in Indonesia (0.7%) and South Korea (down 0.4%) are facing selling pressure. The Indian share market indices have opened the day on a positive note. Stocks in the consumer durables and realty space are leading the gains. However, information technology stocks are trading weak.

The Sensex today is up by around 33 points (0.2%), while the NSE-Nifty is up by around 7 points (0.1%). Mid and small cap stocks are also trading in the green with the BSE Mid Cap and BSE Small Cap indices up by around 0.3% each. The rupee is currently trading at Rs 63.30 to the US dollar.

Barring Hero MotoCorp, most auto stocks have opened the day on a firm note with TVS Motor Company and Tata Motors leading the gains. As per a leading financial daily, the alarming rise in petrol prices has adversely impacted the demand for two-wheelers. After a series of nine price hikes, petrol prices have increased by about 20% in the last four months to record highs. Petrol prices in Mumbai now stand at Rs 83.63 per litre. Two-wheelers account for 60% of India's 16 million tonnes gasoline sales. Of this, about 30% comes from rural India. High petrol prices tend to hit two-wheeler sales because the running cost is a critical consideration for buyers in the mass product segments such as 100-125 cc motorcycles and 110 cc scooters. In July 2013, domestic two-wheeler sales stood at 1.13 million units marginally lower by 0.1% year-on-year.

Private bank stocks have opened the day on a firm note with IndusInd Bank, Yes Bank and Dhanlaxmi Bank leading the gains. India's fourth largest private sector lender Yes Bank has announced that it tied up a multi-tenor syndicated loan facility equivalent to US$ 255 million in dual currency from international lenders. The loan facility comprises US$ 180 million and Euro 58 million. The loan facility will be utilised for general corporate purposes and for trade finance. The facility has a maturity of 1 and 2 years with majority commitments coming in the 2 year tenure bucket. The loan has been widely distributed with commitments from 11 banks in eight countries across US, Europe, Middle East and Australia.

Risk for Indian Pharma has increased

Warning letters and import bans raised by the US drug regulator are unfortunately becoming a regular feature for Indian pharma companies. This has not only tarnished the image of these companies but has also thwarted growth in a market considered to be an important growth driver for generics. It goes without saying that the worst impacted has been Ranbaxy. The company's two manufacturing facilities at Poanta Sahib and Dewas were already under the USFDA scanner. And now one more facility at Mohali has received an import ban. One should note that this facility was developed and received USFDA clearance approximately 1.5 years back. This is unlike the other two which had problems since quite some time. Thus of the four facilities which had approval from the USFDA, three have been imposed by an import ban from the drug regulator.

Ranbaxy is not the only one. In recent times, Wockhardt's Waluj facility also received an import alert. And after that another important facility at Chikalthana received some 483 observations, from the USFDA.

Both the companies have hired consultants to resolve the issues and are working on corrective measures. While the issues at Ranbaxy and Wockhardt are serious, other pharma companies have also been at the receiving end of the US regulator. Indeed, companies such as Sun Pharma, Dr.Reddy's, Aurobindo Pharma and the like have also had problems with the US FDA in terms of maintaining good manufacturing practices (GMP). However, most of them seem to have resolved their respective issues.

That is why the risk of coming under the US FDA scanner has increased for the sector given that the US regulator has also become quite strict in this regard.

Indian pharma must learn a lesson...

In the past, Indian pharma companies had reaped the benefits from the US generics market on the back of many major drugs going off patent. A low cost advantage among others ensured that Indian firms remained competitive. But the spate of plants that have failed to match the standards of the US FDA is worrisome. An interesting, point highlighted in the Mint, says that the Indian companies are building a robust pipeline of drugs. However, if companies fail to comply with the GMP norms than these filings will just be futile.

In our view, it's high time that Indian companies become cautious and take the required steps before hand to ensure that plants are compliant. Else they will soon lose their ground in the US market, which has already become quite competitive. The USFDA is becoming more vigilant and also plans to increase its plant visits. Hence, surprise visits are bound to soon become a regular feature. That is why Indian pharma companies will have to consider this an urgent issue. From a longer term perspective, they will have to build up a system to ensure that the manufacturing facilities are compliant with FDA norms. Even if this entails the occurrence of additional costs.