FMCG, metals aid recovery

Tue, 15 Jun 01:30 pm

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The Indian markets recovered a significant portion of their losses and moved above the dotted line as buying intensified during the previous hour of trade. The overall market sentiment is neutral as the advance to decline ratio is poised at 1.1 to 1 on the overall BSE. While stocks from the IT, banking and auto spaces are amongst the key losers, FMCG and metal stocks are currently the top gainers.

The BSE-Sensex is trading higher by 10 points (up 0.1%), while NSE-Nifty is trading higher by 8 points (up 0.2%). Stocks from the midcap and smallcap spaces are in favour though with the BSE-Midcap and BSE-Smallcap indices trading higher by 0.1% and 0.6% respectively. The rupee is trading at 46.71 to the US dollar.

Auto stocks are currently trading weak led by Maruti Suzuki, Ashok Leyland, M&M and Tata Motors. A leading business daily has reported that India's largest passenger car manufacturer Maruti Suzuki is looking at targeting new export markets. This is on the back of various concerns the company has over its higher export exposure to Europe. It may be noted that during FY10, the company's exports grew by 111% YoY and formed nearly 15% of total sales volumes. During the preceding year i.e. FY09, exports formed about 9% of total sales volumes. A key factor of the strong growth in exports was the demand from Europe (about 80% of total exports), which was high on the back of the continent encouraging buyers to purchase small fuel-efficient cars. However, with the EU beginning to withdraw the incentives, exports of Indian auto companies (including Maruti) have considerably slowed down. In addition, the appreciation of the Rupee against the Euro has also not helped matters. It is believed that Maruti has lowered its EU export target by about 5% to approximately 140,000 units for FY11. Following these developments, the company is now planning to increase exposure to countries such as Algeria, South Africa, Hong Kong, Taiwan, Brunei and Chile.

The pharma stocks are trading mixed with Lupin and IPCA Laboratories trading firm while Cipla and Sun Pharmaceuticals are trading weak. As per a leading financial daily, US based Abbott has sued Ranbaxy Laboratories Limited and Sun Pharmaceuticals for patent infringement on its cholesterol drugs. Abbott has alleged that Ranbaxy has violated the patents on its drug Tricor which has sales of US$ 1 bn in the US market. Sun Pharma has on the other hand been accused of patent violation of the drug Niaspan. Niaspan has a market of US$ 850 m in the US. According to estimates, in the US and EU market, Tricor accounts for 28% of market share, while Niaspan accounts for 26% of market share.

This lawsuit is in keeping with the Para IV filings that would have been made by Sun Pharma and Ranbaxy. The 30 month stay will now be imposed which means that the US FDA will not be able to process the ANDAs for these drugs during this period. In the event that either Ranbaxy or Sun Pharma is able to successfully invalidate the patents on Abbott's drugs then they will be entitled to a 180-day exclusivity period.