Realty, banking amongst top losers

Mon, 17 May 11:30 am

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Continued pessimism led the Indian markets to languish in the red during the previous two hours of trade. The market breadth is negative at the moment as the overall decline to advance is poised at 3.4 to 1 on the BSE. Stocks from all sectors are trading lower with those from the realty, banking, IT and oil & gas seeing the most pressure. Stocks from the healthcare and FMCG spaces are trading marginally lower.

The BSE-Sensex is trading lower by about 390 points (down 2.3%), while the NSE-Nifty is trading lower by around 110 points (down 2.1%). Stocks from the smallcap and midcap spaces are also seeing pressure as the BSE-Midcap and BSE-Smallcap indices are down by 1.7% and 1.8% respectively. The rupee is trading at 45.69 to the US dollar.

Power stocks are currently trading weak led by Reliance Power and Tata Power. As per a leading financial daily, the government has thrown a spanner in NTPC's 1000 MW project. The project being constructed at Mauda near Nagpur, at a cost of Rs 55 bn is slated to start operation in 2013. However, last Wednesday, the District Collector asked the company to stop construction as it failed to comply with the state's provision for relief and rehabilitation. While NTPC has acquired over 3,300 acres of land for relief and rehabilitation, Maharashtra State Rehabilitation Authority (MSRA) found the progress slow and tardy. This prompted the "stop construction" order. It may be recalled that NTPC's board had given the approval for this plant in November, 2007 and the foundation stone was laid in February 2009. This delay is a matter for concern for NTPC as this plant would have added 24 m units of power per day to NTPC's capacity.

Healthcare stocks are trading weak led by Wockhardt, Torrent Pharma and Sun Pharmaceuticals. A leading business daily has reported that the management of Ranbaxy is looking to focus on generic drugs as compared to the current focus on research on development of new drugs. As per the company, this change in strategy is aimed at effecting a better synergy between the parent company, Daiichi Sankyo and Ranbaxy. It is believed that Ranbaxy's Japanese parent company had recently incorporated a new company called Daiichi Sankyo Espha Co Ltd (DSECL), which was mainly aimed at marketing generic drugs. As such, with this, Ranbaxy will be able to develop, manufacture and supply products to the Japanese market.

Daiichi Sankyo and Ranbaxy had signed a three-year synergy plan wherein both the companies would work on developing a hybrid business model. As part of this model, the Indian company would mainly focus on generic medicine research both for itself and its parent firm. Instead, the new drug discovery programme would be taken up by Daiichi Sankyo. As per Ranbaxy's parent company, the whole group is constructing a global research and development setup in collaboration with the New Drug Discovery Research (NDDR) division of Ranbaxy. This is mainly aimed at speeding up the research process and expanding the pipeline of new drug candidates.