Sensex Trades Higher; Automobile Stocks Rally

Mon, 1 Jul 12:30 pm

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Stock markets in India are presently trading higher on strong global cues. The BSE Sensex is trading up by 249 points and the NSE Nifty is trading up by 62 points. Meanwhile, the BSE Mid Cap index and the BSE Small Cap index are trading up by 0.5% and 0.4% respectively.

Among the sectoral indices, automobiles stocks, power stocks and realty stocks are witnessing maximum buying interest.

Speaking of the stock markets, the current pattern of the Indian stock market very closely resembles 2013.

How Long Will this Sensex Outperformance Last?

Back then too, Sensex was relatively flat while mid and small caps underperformed by a huge margin.

Only this time, the divergence is larger.

While the 2013 correction was due to global macro issues, the correction in mid and small caps are due to factors back home.

Corporate governance issues leading to auditor exits plagued many mid and small caps in 2018. Then, we had the IL&FS impact leading to the NBFC crisis.

Will this Sensex outperformance continue?

Co-head of research, Tanushree Banerjee believes it will be difficult going forward. Here's an excerpt of what she wrote:

• "But when I think of safe stocks, I think long-term about the businesses rather than how the Sensex will perform.
  
  I think of businesses that will be a part of India's long-term growth story. I strongly believe these businesses stand to do well irrespective of the movement of the Index."

In the news from the economy. Reserve Bank of India (RBI) in its latest data has showed that India's Current account deficit (CAD), the excess of country's imports over exports, has rose to US$57.2 billion or 2.1% of GDP for the fiscal year ended March 2019 (FY19) as compared to compared to US$48.7 billion or 1.8% a year ago, amid a general slowdown in the economy.

It also indicated that for FY19, the deficit widened despite a narrowing of the same in the fourth quarter of FY19 to US$4.6 billion or 0.7% of GDP, as against US$27.7 billion or 2.7% in the December quarter and US$13 billion or 1.8% in the fourth quarter of FY18.

According to the data, overall trade performance was the prime influencer for both the contraction in CAD for the March quarter as well as a widening for the full year.

It noted that a lower trade deficit of US$35.2 billion in the March quarter, compared to US$41.6 billion in the year-ago period helped in CAD contraction. Similarly, it said an increase in trade deficit to US$180.3 billion for the year as a whole as against US$160 billion in the year-ago period led to the widening of the CAD in FY19.

Data further showed that net services receipts increased 5.8% to US$21.3 billion on the back of a rise in net earnings from telecommunications, computer and information services during the March quarter.

Private transfer receipts, representing mainly the remittances by expat Indians, declined by 0.9% to US$17.9 billion in the March quarter.

The net foreign direct investment stood at US$6.4 billion in March quarter, the same level as the year-ago period, and rose marginally to US$30.7 billion for the year as a whole.

Moving on to the news from the pharma sector. As per an article in a leading financial daily, Alembic Pharmaceuticals received approval from the US Food & Drug Administration (USFDA) for its Abbreviated New Drug Application (ANDA) Clonazepam Orally Disintegrating Tablets USP, 0.125 mg, 0.25 mg, 0.5 mg, 1 mg and 2 mg.

The approved ANDA is therapeutically equivalent to the reference listed drug (RLD), Klonopin Orally Disintegrating Tablets of Hoffmann-La Roche, Inc. (Roche).

Clonazepam orally disintegrating tablet is useful alone or as an adjunct in the treatment of the Lennox-Gastaut syndrome (petit mal variant), akinetic and myoclonic seizures.

Clonazepam Orally Disintegrating Tablets USP has an estimated market size of US$20 million for twelve months ending December 2018 according to IQVIA.

The comapany now has a total of 98 ANDA approvals (86 final approvals and 12 tentative approvals) from USFDA.

Alembic Pharma share price was trading up by 0.2% at the time of writing.

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