No respite from selling pressure

Thu, 1 Jul 01:30 pm

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   Pre-Open   

   09:30 am   

   11:30 am   

   Closing   

Indian indices further lost ground during the previous two hours of trade on account of intensified selling activity across index heavyweights. Stocks from the realty, metal and banking space are weighing heavy on the indices.  While selling activity is being witnessed across sectors, select stocks from the FMCG, telecom and pharma sectors are able to garner investors’ interest.

The BSE-Sensex is down by 220 points while NSE-Nifty is trading 60 points below the dotted line. While the BSE-Midcap index is trading lower by 0.5%, BSE-Smallcap index is trading flat. The rupee is trading at 46.69 to the US dollar.

Rural Electrification Corporation (REC) is planning to raise US$ 400 m through external commercial borrowings (ECB) in the next two months. As reported, the company has given the fund raising mandate to Bank of Tokyo-Mitsubishi. This five year loan is likely to be sanctioned at a rate of 6-month Libor plus 175 basis points. Libor is the widely used benchmark for short-term interest rates. The 6-month Libor rate is currently hovering around 0.7507%. The fund raising move is part of the company’s plans to raise debt worth Rs 280 bn. The company had recently raised Rs 12 bn through a bond issue. Another bond issue is on the cards through which the company is planning to raise Rs 20 bn. This bond issue will be with tenure of 15 years and 9 years at a coupon rate of 8.75% and 8.7% respectively.

REC, which falls under the ministry of power, is focused on lending to the power sector. It currently provides 16% of the 70% debt required to fund power projects. Given the opportunity, it expects to grow its loan book at an average annual rate of 25% over the next 3-5 years. To achieve the same, the company has lined up huge borrowings plan.  Currently, the stock is trading lower.

Pharmaceutical stocks are trading a mixed bag. While Wockhardt, Dr. Reddy’s and Cadila Healthcare are leading the pack of gainers, Natco Pharma is trading weak. As per a leading business daily, Cadila Healthcare has launched a generic version of ‘Anastrazole’ tablets used in the treatment of breast cancer in the US market. The company has launched the drug in the strength of 1 mg after getting approval from the USFDA. The sales of this drug in 2009 were estimated as US$ 1.1 bn, as per NDC Health.  ‘Anastrozole’ is the generic version of ‘Arimidex’, a product of AstraZeneca.

The other two companies that have received approvals to launch the generic version of the same drug are Dr. Reddy’s and Natco Pharma. The approval to launch generic version of the anti-cancer drug will result in an expansion of the product portfolio in the oncology segment of these three major Indian pharma companies. Further, the fact that oncology is a niche segment with limited competition also augurs well for Cadila Healthcare.