Mid and small caps buck the trend

Thu, 29 Mar Closing

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The Indian stock markets had a lackluster outing on the bourses today. After opening in the negative, markets remained in negative territory throughout today's session. Indices constantly remained below the dotted line. While the BSE-Sensex closed lower by around 63 points (down 0.4%), the NSE-Nifty closed lower by around 16 points (down 0.3 %). The BSE Mid Cap and BSE Small Cap, however bucked the trend. These smaller indices closed higher by 0.2% and 0.7% respectively. Pharma stocks led the gains along with consumer durables. The consumer goods and software stocks indices were however trading weaker.

As regards global markets, major Asian indices had a weak outing on the bourses today. European indices also opened the day on a negative note. The rupee was trading at Rs 51.3 to the dollar at the time of writing.

Indian drug majors, Lupin, Dr Reddy's and Sun Pharma have received approvals from the US Food and Drug Administration (USFDA) to sell generic quetiapine fumarate tablets in the American market. These drugs were for multiple strengths of the drug in 25 mg, 50 mg, 100 mg, 200 mg, 300 mg and 400 mg. These tablets are generic equivalent of AstraZeneca's Seroquel Tablets. According to IMS Health data (December 2011), AstraZeneca's Seroquel Tablets had sales of US$ 4.6 bn. Quetiapine is a psychotropic agent and is used for treating mental disorders and depression. These pharma majors expect significant price erosion due to competition, however they are confident that they will be able to gain market share in the US market.

Asset quality concerns have dogged the Indian banking system for the past few quarters. The Reserve Bank Of India (RBI) has now asked banks to improve their ability to manage stressed assets. The total NPA (non-performing assets) s in the system are set to top 3% of the total assets in FY12, against a 2.3% level seen last fiscal. What is worrying however is an over 300% spike in corporate debt restructuring (CDR) this fiscal, which has already touched Rs 763 bn, against Rs 250.5 bn in the previous year. CDR is a mechanism by which banks and other lenders to work out packages for troubled borrowers. This may include reducing interest rates, rescheduling of repayment period, part-waiver of principal or interest, and so on. The overall CDR asset in the system is now over Rs 1.9 trillion.

The country's largest bank, State Bank of India (SBI) has gone on large scale restructuring drive. According to a leading business daily, the bank is expected to restructure loans worth Rs 25-30 bn in the fourth quarter. This is significantly higher than loans worth Rs 26.6 bn that were restructured by SBI in the first nine months of this year. This high level of restructuring however is in line with the current tough macroeconomic environment.