Sensex Finishes Down by 206 Points; Pharma Stocks Lead the Losses

Tue, 23 May Closing

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Indian share markets continued to trade witness selling pressure in the afternoon session. At the closing bell, the BSE Sensex stood lower by 206 points, while the NSE Nifty finished down by 52 points. Meanwhile, the S&P BSE Mid Cap and the S&P BSE Small Cap finished down by 1.6% and 1.9% respectively. Losses were largely seen in pharma stocks, realty stocks and power stocks.

Sun Pharma share price fell 4.3% in today's trade to hit a near six-month low after its overseas arm Taro Pharmaceuticals Industries Ltd reported weak earnings in the March quarter. Sun Pharma stock declined in six out of the last seven trading sessions registering a fall of 8.24% in this period. So far this year, it has fallen 4.3%.

Reportedly, the decline in Taro's earnings was due to increasing competitive intensity and pricing pressure. Taro reported 26% decline in its revenue from a year ago and 11% fall quarter-on-quarter to US$196 million.

Pharma stocks finished deep in red with Aurobindo Pharma share price and Cipla share price leading the losses.

Asian stock markets finished mixed as of the most recent closing prices. The Hang Seng gained 0.05%, while the Shanghai Composite & the Nikkei 225 fell 0.45% and 0.33% respectively. European markets are higher today with shares in France leading the region. The CAC 40 is up 0.63% while Germany's DAX is up 0.29% and London's FTSE 100 is up 0.11%.

The rupee was trading at Rs 64.77 against the US$ in the afternoon session. Oil prices were trading at US$ 50.65 at the time of writing.

Supported by the government's various initiatives, India has surpassed Japan to become the second leading steel producer in the world. According to data released by the International Stainless Steel Forum (ISSF), the country has registered a growth of about 9%, making 3.32 million tonnes of steel in 2016 as against 3 million tonnes in 2015. China remained the world's leading producer, while the U.S. ranked fourth in production at 2.48 million tonnes.

Praising the great development of the industry, the Indian Stainless Steel Development Association (ISSDA), India's apex stainless steel industry association said that country's sustained efforts in collaboration with industry has made this possible and has urged the government to continue the policy support to take the Indian stainless steel industry to newer heights.

ISSDA has further expressed optimism over recently launched National Steel Policy, noting that it will give impetus for long term benefits. It added that several government initiatives like 'Make in India', smart cities, focus on improving sanitation and waste management facilities, building new infrastructure etc is likely to give a strong push to the stainless-steel industry in future.

No Takers For Domestic Steel

The government's proposal to give domestic steel makers a preference in government projects should protect them from cheaper imports. But in the meanwhile, the steel makers are chasing imports out by ramping up production. In February, domestic steel output rose by 12.9% YoY, as large private steel producers such as Tata Steel and JSW Steel ramped up output. Imports during the first eleven months of FY17 dropped by 39% YoY.

But the bigger concern is weak consumption growth. The consumption data over the past few months clearly show that there are no takers for domestic steel. So steel makers have been forced to export more, with overseas shipments up by 78% YoY in the fiscal till February.

Moving on to news from banking sector. Bank of India share price continued to plunge (down 7.4%) after the company reported a net loss of Rs 10.45 billion in the fourth quarter of last fiscal.

The state-owned bank had in contrast reported a net loss of Rs 35.87 billion in the January-March quarter of the previous fiscal, 2015-16. Total income during January-March quarter of 2016-17 was higher at Rs 123.35 billion, from Rs 113.84 billion in the year-ago period.

The bank's gross non-performing assets (NPAs) or bad loans were restricted to 13.22% of the gross advances as at the end of March 2017, against 13.07% year ago.

State Bank of India (SBI) share price fell 1.8% to Rs 289.15 after strong performance in the fourth quarter has failed to cheer investors because of the large stock of bad loans of its associate banks that the bank inherited after their merger with it.

Other PSU bank stocks also languished in red with United Bank of India share price and Corporation Bank share price falling 5.5% and 4.8% respectively.

In news from oil & gas sector, as per a leading financial daily, Gas Authority India (GAIL) has signed a first-ever time-swap deal to sell some of its US liquefied natural gas (LNG) as it rejigs the supply portfolio in line with domestic demand.

Moreover, the company is yet to receive LNG from its shale gas project in US from March next year. It has however time swapped some of the supplies.

Under the agreement, it will get 15 cargoes or about 0.8 million tonnes of LNG from an unnamed trader this year. In return, GAIL will sell 10 cargoes or about 0.6 million tonnes next year from Sabine Pass on the US Gulf coast.

GAIL share price fell to its lowest level in three months after the company posted a 69% fall in fourth-quarter profit. The company reported a Rs 2.6-billion net profit for the fourth quarter of the financial year 2016-2017 lower than the Rs 8.32 billion-net profit in the same quarter of 2015-2016 on account of impairment of investment in Ratnagiri Power plant.

The company provided for an impairment loss of Rs 7.83 billion out of carrying value of investment of Rs 9.74 billion in the joint venture entity of Ratnagiri Power plant. The power plant has been running lower than its 2,000 MW generation capacity. This is due to the high cost of power produced from gas-based generation facilities. The lower off take and generation were some reasons for the investment impairment, the reports noted.

GAIL finished the day down by 2.7%.

And here's a note from Profit Hunter:

The pharma stocks are the worst performers for the day. Auro Pharma (-6%), Cipla (-5%), and Sun Pharma (-4%) are among the top losers in the Nifty 50 Index.

Sun Pharma announced its Q4FY17 results today. The stock reacted by falling 8% during intra-day trading.

After the stock topped out at Rs 1,200 in April 2015, it has traded in a downtrend - in a falling channel as seen in the chart below.

Recently, the stock found support from the channel's support line and bounced to retest the channel's resistance. But the stock lacked strength and slid from the channel midway.

Today, as the stock announced its quarterly results, it opened gap down and slipped 8% to trade below its previous low of Rs 609. By the end of the day, it recovered a bit and is now down 4%, just above its previous low.

Now, if the stock falls below its previous low, it might retest the channel's support line at Rs 570. But on the flip side, if the stock finds support here, it might aim for the channel's resistance line. Let's wait and see what it does...

Sun Pharma Reacts to Q4FY17 Results

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