Sensex Trades on a Volatile Note; Pharma Stocks Gain

Wed, 31 May 01:30 pm

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After opening the day negative, Indian share markets witnessed volatile activity and are currently trading flat with a positive bias. Sectoral indices are trading on a mixed note, with stocks in the pharma sector and the IT sector witnessing maximum buying interest. Stocks in the FMCG sector and stocks in the capital goods sector are leading the losses.

The BSE Sensex is trading up by 15 points (up 0.1%) and the NSE Nifty is trading flat. Meanwhile, the BSE Mid Cap index is trading up by 0.9%, while the BSE Small Cap index is trading up by 1%. The rupee is trading at 64.51 to the US$.

In news from stocks in the pharma sector. Glenmark Pharma share price is in focus today and surged over 2.5% in intraday trade.

Glenmark Pharma announced that it had received final approval form the US Food and Drug Administration (USFDA) approval for its Atomoxetine capsules.

Atomoxetine capsules, a generic version of Strattera Capsules of Eli Lilly and Company, is used to treat attention-deficit hyperactivity disorder.

Citing IMS Health sales data for the 12 months to April 2017, the company said Strattera capsules achieved annual sales of approximately US$ 1.1 billion.The company's current portfolio consists of 117 products authorised for distribution in the US marketplace and 67 Abbreviated New Drug Applications (ANDA) pending approval with the USFDA.

Glenmark Pharma share price had plunged by over 30% this month over tepid results and subdued growth.

The BSE Healthcare Index too, is down by over 9% in month.

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.

We had 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.

In such a volatile environment, how can earn good returns from the stock markets?

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Moving on to news about the economy. Market participants have remained cautious over the release of the Q4 Gross Domestic Product (GDP) numbers expected today. In the third quarter, the GDP had grown marginally lower, at 7%, down from 7.4% in Q2.

GDP Growth in Recent Quarters

Meanwhile, credit rating agency Moody's has projected India's GDP to accelerate and grow at 7.5% in 2017-18 and 7.7% in 2018-19.

The ratings agency said the government has been able to limit the negative impact of demonetisation on the economy.

Moody's also said the government has been successful in pushing through several key reforms including liberalization of foreign direct investment rules in a number of key sectors, the direct benefit transfer (DBT) scheme, and the goods and service tax (GST), which is expected to come into effect in July.

However, it maintained that private sector investment has remained weak despite progress on reforms. It also noted the persistent weakness in the banking sector and that it could weigh on growth if not resolved soon.

India's statistics department will revise its initial estimate of 7.1% growth in 2016-17 later today. The government believes that GDP growth for FY17 to be at 7.1%. Mind you, this would still be below the 7.6% growth recorded in FY16. We believe, FY17 GDP growth could, in fact be significantly lower than 7.1%.

Here is what Dr Jim Walker, founder and chief economist of Asianomics Group, had to say about the government's estimates in his one of his Asianomics Macro updates.

The government's new growth forecasts are not only optimistic but downright bizarre. The market is concerned that even with the new (still optimistic) growth forecast of 7.1%, the government's budget deficit target of 3.5% of GDP will be overshot.

A while back, in an interview with Vivek Kaul and Rahul Goel, CEO of Equitymaster, Dr Jim Walker had shared his views on a variety of topics including the Indian and Chinese economies. It's worth revisiting.

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