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Markets cautious after rate hike
Thu, 17 Mar 01:30 pm

After trading in a flat territory during the previous two hours of trade Indian stock markets have been cautious after the rate hike announced by RBI. Stocks from the consumer goods and consumer durables are trading strong, while those from the auto and IT space are trading weak.

Currently, the BSE-Sensex is down by 145 points while NSE-Nifty is trading 45 points below the dotted line. BSE Midcap and BSE Small cap indices are both down by 0.33% and 0.16% respectively.

In the mid-quarter policy review announced recently RBI has hiked key policy rates by 25 basis points (bps). Following the hike repo rate now stands at 6.75% while the reverse repo rate stands at 5.75%. However, CRR has been left unchanged at 6%. It may be noted that amidst rising inflation, RBI has hiked the interest rates for the eighth time since last March. Even in the last policy review, key rates were raised by 25 bps. While annual inflation for the month of February stood at 8.31%, food inflation continues to remain a worrisome factor as it has remained close to double digits. Considering the substantial rise in inflation the RBI has also raised March-end inflation forecast to 8% (from 7% earlier). However, the GDP growth forecast remains unchanged at 8.6%.

Indian pharmaceutical companies are trading mixed with Wockhardt and Biocon trading strong, whereas Dr. Reddy's and Cadila Healthcare are trading weak.  National Pharmaceutical Pricing Authority, the drug price regulator has allowed local pharmaceutical companies Wockhardt and Biocon to increase prices of their insulin brands due to rising input costs. These are the only 2 local pharmaceutical companies that make and sell insulin in India and their products are said to be a third cheaper than imported brands or those made from raw materials sourced from abroad. The drug price regulator increased the price cap of locally manufactured insulin by up to 18.55%. This follows the regulator's decision to raise the price cap on bulk drugs or ingredients used for making insulin by 16%. A marginally higher increase in insulin price is approved because of the rising conversion cost, packing charges, process loss and packing material. Wockhardt and Biocon's insulin brands will continue to be 18% cheaper than competing products despite the price increase. Both the Indian players account for a small market share of just 10% of the estimated Rs 2.5 bn insulin market.

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