Sensex Trades in Red; PSU Stocks Witness Buying

Mon, 10 Apr 01:30 pm

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After opening the day on a flat note, share markets in India witnessed volatile trading activity and are trading marginally below the dotted line. Sectoral indices are trading on a mixed note with stocks in the PSU sector and stocks in the oil and gas sector trading in green, while stocks in the IT sector are leading the losses.

The BSE Sensex is trading down by 101 points (down 0.3%), and the NSE Nifty is trading down by 23 points (down 0.2%). Meanwhile, the BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading up by 0.4% The rupee is trading at 64.55 to the US$.

In news from stocks in the pharma sector, Cadila Healthcare share price is in focus today after the Ahmedabad-based pharma major informed the stock exchanges that its manufacturing facility successfully cleared US Food and Drug Administration (USFDA) inspection.

The USFDA inspected the company's topical manufacturing facility at Changodar, near Ahmedabad from April 3 to April 7, 2017. The company has filed 17 products with the USFDA from this facility

The company stated that no observation through form 483 was issued by the US regulator.

Form 483 relates to certain critical observations issued to a company at the end of an inspection if there were any violations of the Food Drug and Cosmetic Act and other related acts of the US Government.

Companies that receive its observations must respond in writing with a corrective action plan and implement it quickly. If the company does not meet the USFDA's expectations, a warning letter may be issued.

Earlier, in February, the company's Moraiya unit too did not receive any observations from the USFDA.

After opening the day up by over 1%, Cadila healthcare share price is trading down by 0.4%.

USFDA investigations and stringent regulatory procedures have cast a shadow over the Indian pharma sector. While Cadila Healtcare managed to breeze through the regulations, many Indian pharma giants haven't been as lucky.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years. The sector has faced great volatility over the years.

Volatility in the Pharma Sector

We had recently written about the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

• Over the past few years, risk in the US markets has increased. The US Food and Drug Administration has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

Give it a read to form a better understanding of the current scenario in the Indian pharma sector.

Moving on to news from stocks in the PSU sector. According to an article in The Economic Times, world's largest coal miner Coal India is mulling a plan to acquire coking coal mines in Australia.

While the company announced that from its list of probable destinations for investment including the US, Colombia, Canada and Indonesia, the coal giant has decided to focus on Australia and South Africa for the current acquisitions.

The state-owned coal giant started exploring opportunities outside India in January 2017, via its subsidiary Coal Videsh. Lack of technological wherewithal required to build domestic reserves prompted the public sector coal miner to explore opportunities abroad in January 2017.

The government of Australia has put on offer some coking coal blocks. Coal India has initiated dialogues with the Australian government to supplement the requirement of country's metallurgical coal. However, the discussions are in a very preliminary stage.

India's dependence on imports is particularly heavy on coking coal which is a vital ingredient in the steel making process.

The National Steel Policy aims at achieving increased domestic availability of washed coking coal to reduce import dependence on coking coal by 50% by 2030-31.

Recognising limited availability of metallurgical coal as an 'disadvantage' for Indian steel sector, the draft steel policy aims at increasing supply of domestic coking coal to cut dependence on imports by half and a production of 300 million tonnes of the alloy by 2030-31.

Coal India accounts for over 80% of the domestic coal production.

For the year 2016-17, CIL's coal production increased marginally by 2.9% to 554.13 mt, missing the target of 598.61 mt set by the ministry earlier.

At the time of writing, Coal India share price was trading up by 1.1%

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