Metals and banks propel indices

Mon, 21 Jun Closing

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Indian markets opened on a strong note today and stayed well above the dotted line on the back of sustained buying activity across index heavyweights. While the BSE Sensex closed higher by around 292 points (up 2%), the NSE Nifty gained around 91 points (up 2%). Midcap and smallcap stocks also did well as the BSE Midcap and BSE Smallcap notched gains of 1% each. Gains were largely seen in metals and banking stocks.

As regards global markets, Asian indices closed firm today while the European indices have also opened on a positive note. The rupee was trading at Rs 45.76 to the dollar at the time of writing.

As per a leading business daily, Marico is looking to establish a strong presence in the foods category. The management opines that foods is a strongly under-penetrated category in India. Further, the company believes that packaged foods will grow with disposable incomes increasing, aspirations rising and organised retail growing. Marico will focus more on Saffola, which it believes is a powerful and reasonably under-leveraged brand. Currently, within the Saffola franchise, 98% comes from oil, and the company is hopeful of getting 20-25% from foods in 3-4 years. The company is also focused on increasing its presence in the rural markets. The rural contribution for Marico is around 25%, which is lower as compared to its peers. The company aims to increase this to 30% plus over the next 3-4 years. The stock closed 3% higher today.

Pharma stocks closed mixed today. While Sun Pharma and Ranbaxy found favour, Lupin and Glenmark closed in the red. As per a leading business daily, Glenmark has recalled specific lots of its 'Oxcarbazepine' tablets in the US. This drug is used for the treatment of child epilepsy. The reason for the same has been attributed to a labeling error. It must be noted that Glenmark had received USFDA approval to sell generic 'Oxcarbazepine' tablets in the US in 2007 in three strengths of 150 mg, 300 mg and 600 mg. 'Oxcarbazepine' is a generic version of Novartis' patented drug 'Trileptal'. The drug is estimated to have sales of over US$ 700 m annually in the US market. Although there will hardly be much of an impact on Glenmark's overall revenues, Indian pharma companies have been facing increasing issues with the US FDA as of late.

China announced that it would effectively de-peg its currency. This thus sets the tone for a fresh appreciation of the Chinese Yuan. It also provides a booster dose the global economy was so badly looking for. A rising Yuan puts more purchasing power in the hands of Chinese consumers and its firms. And this in turn leads to increased demand of goods and services for nations exporting to China. Besides, the appreciation is also positive for other Asian nations competing with China for a share of the exports pie.

The move could present another headache for the Indian central bank (RBI) though. Capital flows into emerging markets could surge yet again, raising fresh concerns about asset bubbles. Clearly, the Chinese de-pegging has the potential to give rise to completely new set of problems and opportunities. We hope Indian authorities are equal to the task.