No respite for Indian indices

Tue, 13 Apr Closing

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Indian markets had a weak trading session today as the indices languished in the red throughout the day led by persistent selling across index heavyweights. While the BSE Sensex closed lower by around 32 points (down 0.2%), the NSE Nifty lost around 17 points (down 0.3%). Midcap and small cap stocks were not spared either as they closed lower by 0.3% and 0.1% respectively. Losses were largely seen in auto and banking stocks.

As regards global markets, most Asian indices closed mixed today. European indices have opened on a weak note. The rupee was trading at Rs 44.54 to the dollar at the time of writing.

As per a leading business daily, Tata Tea and US soft drinks giant PepsiCo are looking to explore the formation of a joint venture in ‘healthy’ non carbonated beverages. While the details of the same have yet to be finalized, the move appears to be part of Tata Tea’s strategy to transform itself from a tea and coffee company to a multi beverage company.

Not just that, Tata Tea is also planning to financially integrate its global operations. The company currently has several subsidiaries spread across the globe, involved in marketing loose and branded coffee, speciality, flavored and green tea, ready-to-drink products and mineral water. What is more, Tata Tea has stated that it aims to grow to US$ 10 bn by 2015 from the present US$ 1 bn in the next 5 years which implies a CAGR of 59%. Majority of this growth is likely to be sought through inorganic routes. The stock closed lower today.

Pharma stocks closed mixed today. While Cipla and Wockhardt found favour, Ranbaxy and Dr.Reddy's closed into the red. Indian pharma companies may have spread their wings far and wide across the globe. In many overseas markets they have managed to establish a formidable presence. But not so in China. The Chinese pharma market is beset with a slew of challenges which Indian companies are finding difficult to overcome. These include strong barriers for market access, longer time to build commercial infrastructure and difficulty in competing with Chinese players on cost.

Not just that, language is a barrier which means that the only way to gain a foothold would be through a JV with a local partner. But even that is not easy. The challenge again being finding a trustworthy partner and establishing distribution set up in the highly government regulated Chinese market. But some Indian companies are still upbeat that healthcare reforms introduced by the government would enable Indian companies to penetrate this market. One will, however, have to wait and watch.

As per a leading business daily, World Bank is of the view that India can emerge as the world's second largest economy in the year 2039, bigger than the US, if its GDP continues to grow at the rate of 8-9%. In that case, India's average per capita income would jump 22 times to US$ 22,000 around 30 years from now. We believe the key here is sustaining the 8-9% growth in GDP which seems a tall order for the next 30 years. Certainly no one can doubt the long term growth prospects of the Indian economy. But there are still many challenges that the country needs to overcome especially on the infrastructure front if such high growth rates are to be maintained.