Persistent selling mars indices

Fri, 10 Jun Closing

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Indian stock market indices languished in the red throughout the trading session today on the back of persistent selling pressure across index heavyweights. There was no respite in the final trading hour either and the indices closed well below the dotted line. While the BSE-Sensex closed lower by around 116 points (down 0.6%), the NSE-Nifty closed lower by around 35 points (down 0.6%). The BSE Midcap and BSE Small cap were not spared either as they closed lower by 0.3% and 0.5% respectively. Losses were largely seen in FMCG , banking and metals stocks.

As regards global markets, Asian indices closed mixed today while European indices have also opened on a mixed note. The rupee was trading at Rs 44.74 to the dollar at the time of writing.

Pharma stocks closed mixed today.While Glenmark and Dishman Pharma found favour, Biocon and Cipla closed in the red. After a lean period for the contract manufacturing and research (CRAMS) industry, the scenario is expected to look better over the next couple of years. As per a leading business daily, the domestic market for CRAMS is set to capture a sizeable chunk of the global outsourcing pie by 2012. The size of the CRAMS sector in India was pegged at US$ 3.8 bn in 2010 and is set to touch US$ 7.6 bn in 2012. What is more this 41% compounded growth over the next two years will outpace the global outsourcing market, which is expected to grow at a much lower CAGR of 12.6%.

It must be noted that India has many advantages which makes it an attractive destination for CRAMS. Chief among these are large number of USFDA approved plants, low cost advantage and skilled manpower. During 2007-10, the Indian contract research industry grew quickly to around US$ 1.5 bn at a CAGR of 65% but on a small base. There is huge scope for growth as only around 20% of global pharma R&D spend is being outsourced. Further, global pharma majors are under continuous pressure to bring drug costs down, which all the more strengthens the case for outsourcing.

Food inflation worries for India have refused to abate and food prices may accelerate in the coming months. As per a leading business daily, the government raised the prices it pays farmers for rice and oilseeds making crops more expensive. The rationale for the government raising the minimum prices is to encourage more crop planting and to assure farmers' incomes. This is then expected to have an impact on food prices which have refused to ease off over the past couple years and have fuelled overall inflation. To make matters worse, global food prices reached an all time high in February this year driven by stronger demand and harvest disruptions. Food prices have been the primary cause for high inflation in India and the RBI has raised rates several times over the past quarters to bring it under control. But this has so far not come down within the comfort limits of the central bank. Thus, it remains to be seen what further steps the government chooses to take to tackle inflation.