Sensex Opens Lower; Metal and Energy Stocks Lose

Mon, 17 Jun 09:30 am

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Asian share markets are higher today as Chinese and Hong Kong shares show gains. The Shanghai Composite is up 0.3% while the Hang Seng is up 0.9%. The Nikkei 225 is trading up by 0.1%. US stocks ended lower on Friday as investors were cautious going into next week's Federal Reserve meeting, while a warning from Broadcom of a broad weakening in global demand weighed on chipmakers and added to US-China trade worries.

Back home, India share markets opened the day on a lower note. The BSE Sensex is trading down by 112 points while the NSE Nifty is trading down by 40 points. The BSE Mid Cap index and BSE Small Cap index opened down by 0.3% and 0.2% respectively.

Barring IT stocks, telecom and healthcare stocks, all sectoral indices have opened the day on a negative note with metal stocks and energy stocks leading the losers.

The rupee is currently trading at 69.87 against the US$.

Speaking of Indian stock markets, note that the Sensex, BSE Midcap index and BSE Smallcap index have had differing degrees of volatility over past fifteen years.

But the returns from the three different indices are mostly in line since 2004. Rs 100 invested in any of these indices in 2004 would have yielded about Rs 700 by March 2019.

In fact, as we can see in the chart below, the gap in the compounded annual return of the Sensex and Smallcap index is less than 1%.

Difference in 15-year CAGR of Sensex and BSE Smallcap Index is Less than 1%

This shows that while small caps are a good place to look for big returns, blue chips can also offer you big returns over long time frames.

In fact, as per Tanushree, the best contrarian bets on such safe stocks could even offer you handsome three digit returns.

In the news from the economy. India's trade deficit expanded to a six-month high of US$15.4 billion in May, with import growth outpacing export growth following a 37% jump in gold imports.

According to data released by the commerce ministry on Friday, exports grew 3.9% in May, while imports rose 4.3%. Exports have been in low single digits in six out of the last seven months, barring March when it grew in double digits.

Rising crude oil prices, amid sanctions on Iranian oil imports, could further increase imports and put pressure on India's current account deficit.

China's exports in May inched up 1.1%, while imports fell 8.5%, leading to a significantly higher trade surplus of US$41.7 billion.

The escalating trade war between the US and China, and rising protectionism have cast a shadow on India's prospects for higher exports.

In March, the World Trade Organization (WTO) had projected trade growth to fall from 3.9% in 2018 to 3.7% in 2019. It had cautioned that these estimates could be revised downward if trade conditions continue to deteriorate.

The International Monetary Fund also cut its global growth forecast for 2019 by 20 basis points to 3.3%, the lowest since the 2008 financial crisis, blaming the US-China trade tensions, loss of momentum in Europe and the uncertainty surrounding Brexit.

Notably, the commerce ministry is contemplating an export promotion scheme, along with a production-based support scheme, to boost Make In India as part of its 100-day action plan.

The new export promotion scheme may replace the existing Merchandise Export from India Scheme, following the US decision to challenge India's existing export subsidy schemes at the WTO.

Moving on to the news from the pharma sector. As per an article in a leading financial daily, Divis Laboratories' Unit-II at village Chippada, Bheemunipatnam District, Andhra Pradesh has had an inspection by the USFDA from 10 June 2019 to 15 June.

This was a general cGMP inspection by the USFDA. The inspection has been concluded with no 483 observations.

Meanwhile, Cadila Healthcare announced that Nesher Pharmaceuticals, a subsidiary of Zydus Pharmaceuticals USA, has received the final approval from the USFDA to market Omega-3-Acid Ethyl Esters Capsules USP (US RLD Lovaza Capsules), 1 gram.

Omega-3 acid ethyl esters, a type of fat found in fish oil, is used along with diet and exercise to help lower levels of a certain blood fat (triglyceride). It may also raise good cholesterol (HDL).

The drug will be manufactured at Nesher Pharmaceuticals' manufacturing facility located at St. Louis, MO, USA.

The group now has 267 approvals and has so far filed over 360 ANDAs since the commencement of the filing process in FY 2003-04.

In a separate announcement on Saturday, Cadila Healthcare said that the manufacturing facility of Alidac Pharmaceuticals (Alidac), located at Pharmez, Ahmedabad has received an Establishment Inspection Report (EIR).

Alidac is a 100% subsidiary of Cadila Healthcare.

Divis Lab share price and Cadila Healthcare share price opened the day up by 1.9% and 0.8% respectively.

To know what's moving the Indian stock markets today, check out the most recent share market updates here.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

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