Sensex Trades on a Positive Note; Power Stocks Gain

Fri, 27 Jan 01:30 pm

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After opening the day in the green, the Indian share markets have continued to trade strong and are currently trading above the dotted line. With the exception of stocks in the FMCG sector all sectoral indices are trading on a positive note. Stocks in the Power sector and the banking sector are leading the gains.

The BSE Sensex is trading up 181 points (up 0.7%) and the NSE Nifty is trading 42 points (up 0.5%). Meanwhile, the BSE Mid Cap index is trading up by 0.8%, while the BSE Small Cap index is trading up by 0.7%. The rupee is trading at 68.17 to the US$.

NTPC Ltd's shares are in focus today as the company made its debut in the euro market with a deal worth 500 million euros. NTPC Ltd, India's biggest power producer, has raised 500 million euros through overseas bonds sale that perhaps may be the first longest tenor euro-denominated issuance by an Indian company.

NTPC sold euro-denominated bonds with 10-year maturity, the longest in the currency. The issue got bids for US$ 2.4 billion, or nearly five times the targeted size. Securities have been priced at 200 basis points over Euro Treasury. Axis Bank, Bank of Tokyo-Mitsubishi UFJ, Barclays are some of the investment bankers to the NTPC deal.

This is the first-ever 10-year euro denominated bond issuance by an Asian utility issuer and also the first-ever 10-year euro transaction by an Indian issuer. The 10-year bond has been issued at a coupon of 2.75% with a yield of 2.814%. The company will use the issue proceeds for capex.

With NTPC raising money through overseas bonds, on the back of a US$ 1 billion overseas bond issue by Vedanta Resources, it is clear that the corporate houses are hurrying to tap the global bond market ahead of an expected steep rise in US interest rates.

Our team has written a detailed report on how NTPC can leverage its capabilities and convert them into higher revenues and profits. Do give it a read (subscription required).

NTPC's share price was trading up by 2.5% at the time of writing.

Moving on to news from the pharma sector. Dr Reddy's Laboratories (DRL) is facing legal trouble as South Korean biotech company Mezzion Pharma has filed a suit for damages against Dr Reddy's in New Jersey State court in the US.

The suit alleges that the Hyderabad-based supplier had committed fraud by hiding significant deficiencies in the Current Good Manufacturing Practice (CGMP), regulations enforced by the US health regulator - US Food and Drug Administration (FDA).

The suit also states that Dr Reddy's misconduct was the sole reason given by the FDA to deny approval of Mezzion's new drug application (NDA) for its new drug - udenafil - and for FDA's refusal to grant marketing approval for the finished drug product.

As a result, Mezzion has incurred delay and expense and was forced to seek new manufacturers and suppliers. The Korean Firm is currently taking the necessary steps required to resubmit its udenafil NDA to the FDA for approval. It also seeks to recover from Dr Reddy's millions of dollars in damages for fraud, fraudulent concealment and other counts.

On November 2015, the FDA had issued a warning letter to DRL after an inspection at its active pharmaceutical ingredients facilities at Miryalaguda (Telangana) and Srikakulam (Andhra Pradesh), and its oncology formulation facility at Visakhapatnam (Andhra Pradesh).

The US regulator had identified numerous deviations and violations in FDA compliance.

It said it had also uncovered a previously unknown and uncontrolled custom quality control laboratory, which engaged in a "practice of substituting repeat tests after failing results".

DRL, second largest drug manufacturer in India, is expecting the FDA to re-audit the three units during the current quarter.

Dr Reddy's Lab share price was down by 0.9%.

This come as another blow to the Indian pharmaceutical industry, which has come under a lot of regulatory pressure in the past few years. This has led to a much higher volatility in the sector. However, as a prudent investor ypu can make the best of this volatility to pick the best fundamentally strong stocks at cheap valuations.

Indian Markets Valuations Still Reasonable

At the current Market Cap to GDP ratio - The Buffet Indicator, the Indian markets still remain a stock pickers market.

Mr Market provides you with stock quotes every day. It is swayed by market sentiments in the short run. However, over the long run, it is the fundamental value that drives the stock.

The ValuePro team aims to find selective stocks to its subscribers that are fundamentally strong, and are also trading at a discount to its intrinsic value. One such attractively priced stock from the healthcare industry was recently recommended by the team. If you haven't read the report already, I would urge you to read the complete report here. (Subscription Required).

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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