Sensex Opens Over 125 Points Led by Automobile & Bank Stocks

Mon, 3 Apr 09:30 am

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Asian equity markets are higher today as Japanese and Hong Kong shares show gains. The Nikkei 225 is up 0.36%, while the Hang Seng is up 0.43%. US stocks closed lower in their previous trading session.

Meanwhile, share markets in India have opened the day on a firm note on positive Asian cues. The BSE Sensex is trading up by 125 points while the NSE Nifty is trading up by 31 points. The BSE Mid Cap index and BSE Small Cap index have opened up by 0.3% & 0.2% respectively.

Barring realty stocks, all sectoral indices have opened the day in green with the automobiles sector and banking sector, oil & gas sector leading the pack of gainers. The rupee is trading at 64.84 to the US$.

Bank stocks have opened the day on a mixed note with Dena Bank and Corporation Bank being the most active stocks in this space. In the latest development, the State Bank of India (SBI) has merged its five Associate Banks, State Bank of Bikaner and Jaipur, State Bank of Hyderabad, State Bank of Mysore, State Bank of Patiala, State Bank of Travancore besides Bharatiya Mahila Bank (BMB) - with itself with effect from April 1.

Reportedly, the total customer base of SBI will reach 370 million with a branch network of around 24,000 and nearly 59,000 ATMs across the country. Also, the merged entity will have a deposit base of more than Rs 26 trillion and advances level of Rs 18.50 trillion.

Notably, with this merger, the bank will join the league of top 50 banks globally in terms of assets. The government had in February approved the merger of these five associate banks with SBI. Later in March, the Cabinet approved merger of BMB as well.

Post-merger, the bank will rationalise its branch network by relocating some of the branches to maximise reach. This will help the bank optimise its operations and improve profitability, the reports noted.

Looking at the market share of the top public and private sector players in the industry, it is very fragmented to say the least. SBI has less than 20% share and there are several smaller players. Of the 46 commercial banks, only two figure among the world's 100 largest banks. The top 10 banks contribute around 60% share of the total credit.

Top 10 Banks' Contribution to Total Credit

In addition, banks need to invest in technology and automation to adapt their risk controls to digital payments. Such investments are practically impossible for the smaller players in the sector and expose them to huge risks. Consolidation of the banking sector is therefore inevitable.

SBI share price opened the day up by 1%.

Moving on to the news from stocks in pharma sector. As per an article in a leading financial daily, the National Pharmaceutical Pricing Authority (NPPA) has increased price of stents by around 2% after taking into account wholesale price index.

The prices of bare metal stents have gone up to Rs 7,400 from the earlier announced prices of Rs 7,260. Similarly, price of drug eluting stent has increased to Rs 30,180 from Rs 29,600 earlier.

Further, NPPA has brought 20 more drugs under price control. These include drugs to cure liver diseases, hormone tablets, anti-rabies immunoglobulin, anti-Tuberculosis and blood thinners. The NPPA has revised prices of 26 drugs. This revision comes with the movement in the WPI.

In one of our premium edition of The 5 Minute WrapUp, we have written about the regulatory system in India and various measures taken by the government to control the domestic drug prices (Subscription Required). Every year, more drugs are added to the price control list. The government has also begun to control the prices of medical devices.

However, according to the US government, India's decision to control prices of cardiac stents shows it is a country that isn't business-friendly. Overseas companies, including US-based Abbott and Boston Scientific, account for almost 70% of India's stent market.

The stent price caps would prevent patients from accessing further innovation in this space, according to global stent manufacturers.

Pharma stocks opened the day on a mixed note with Indoco Remedies and Cadila Healthcare leading the loses.

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