Largecaps not in favour at present

Tue, 11 May 01:30 pm

   Previous Close   

   Pre-Open   

   09:30 am   

   11:30 am   

   Closing   

The India markets continued to trade well below the dotted line during the previous two hours of trade. However, buying activity at the lower levels led the markets rise above the day's low. Apart from selected stocks from the banking and auto spaces, most of the stocks forming part of other sectors are seeing some pressure. At present, the market breadth is negative as the overall decline to advances ratio is poised at 1.3 to 1 on the BSE.

BSE-Sensex is trading lower by about 125 points (0.8%) while NSE-Nifty is trading 40 points (0.7%) below the dotted line. BSE-Midcap Index is trading lower by 0.5% while BSE-Smallcap index is trading 0.2% above yesterday's closing. The rupee is trading at 45.08 to the US dollar.

Hotel stocks are currently trading firm led by Taj GVK, Hotel Leelaventure, Indian Hotels and EIH. It was recently reported that Indian Hotels has paid back debt of about US$ 185 m (or about Rs 8.4 bn) that it had taken to finance capex on new projects, renovations as well as for investment in international subsidiaries. This it has done through restructuring its shareholding in Sea Rock hotel (Rs 7.5 bn proceeds from the same). In addition, it is believed that the company has also restructured a part of its Rupee loans. The company raised a fresh secured Rupee debt of Rs 3 bn during 4QFY10. As such, with this move it is reported that the total debt on the company's book has been brought down to levels of Rs 40 bn from Rs 41 bn earlier. This will bring some respite to the company's profitability going forward.

Apart from the overall debt amount being brought down, the restructured debt portion will also help the company pay a lower interest rate. The interest amount has been an issue for the company over the past year. During 4QFY10 and 9mFY10, interest costs for the company rose by 105% YoY and 77% respectively. Indian Hotels' interest coverage ratio stood at about 3.3 times during 9mFY10.

As per a leading financial daily, US-based Purdue Pharma has filed a patent infringement suit against India's largest drug company Ranbaxy. The suit was filed after Ranbaxy's US subsidiary, Ranbaxy Pharmaceuticals Inc, applied for marketing approval of a low-cost version of Purdue's pain relieving medicine, Oxycodone. Purdue has also sued generic drug makers Mylan and Actavis on the same patent infringement charge.

In its application, Ranbaxy has challenged the validity of three patents on Oxycodone in the US. Ranbaxy had last year also attempted to challenge another patent on Oxycodone. However, it later withdrew the application, acknowledging the patent rights of the medicine. As per US laws, a company which intends to apply for marketing approval of a patented medicine should first notify the patent holder. This gives the innovator an opportunity to file a patent infringement suit against the company. Is also ensures an automatic stay on the marketing approval for a period up to 30 months. It may be noted that Oxycodone is a drug derived from opium and is administered to critical patients with acute pain. In case Ranbaxy is able to prove that the patent is invalid, it will gain a 180 days exclusive marketing approval which will help boost its revenues. However, in such cases, courts take a long time to pass their verdicts.