Indian Markets Trade in the Red

Mon, 9 Nov 11:30 am

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After opening the day deep in the red, the Indian Indices capped some gains but failed to inch enough upwards and continued to trade negatively. Sectoral indices are trading on a discouraging note with stocks from the pharma, banking and capital goods sector witnessing maximum selling pressure.

The BSE-Sensex is trading down 299 points (down 1.1%) and the NSE-Nifty is trading down 90 points (down 1.1%). The BSE Mid Cap index is trading marginally higher and the BSE Small Cap index is trading up 0.4%. The rupee is trading at 66.38 to the US$.

India's leading pharma company Sun Pharma has announced its results for the second quarter ended September 30, 2015 (2QFY15). The net sales during the quarter declined by 15% YoY to Rs 68 billion. The sales decline was due to supply constraints and higher base sales in US during 2QFY15. The company had benefited from one 180-days exclusivity launch during this period. The company has reported a 46% year on year (YoY) decline in its consolidated net profit to Rs 11 billion for the quarter on a. The sharp plunge was on the back of lower sales growth, volatile currency movements and supply constraints.

Sale of branded formulations in India for the quarter rose 1% YoY and accounted for nearly 26% of total sales. Sales in the US were US$ 510 million, down 28% YoY and accounted for 48% of total sales. Sales in the emerging markets fell 16% YoY and accounted for 13% of total sales. External sales of active pharmaceutical ingredients rose 13% YoY to Rs 3 billion.

As per the management, the company continues to invest significantly in enhancing its specialty and complex generics pipeline. Further, the management has stated that the integration of Ranbaxy is progressing well and the benefits of certain costs incurred will be visible in the successive months. The firm is also evaluating opportunities to expand its global footprint. In the past, Sun Pharma has done various acquisitions and has been able to turn them around as well. The company's recent acquisition of Ranbaxy is expected to bring around US$ 300 miliion in next 2-3 years. These synergies are expected to improve the company's margins going forward.

Presently the stock of Sun Pharma is trading down by 4.6%.

Banking stocks are trading negatively with IDFC Bank and ICICI Bank witnessing maximum selling pressure. As per a leading financial daily, the newest private sector lender in India IDFC Bank is aiming to fill the space being left by the inability of state-run banks to expand their balance sheet due to capital constraints.

With this opening, the bank will be gearing up to build up its retail franchise. Initially, the bank will be focusing on the non-core income side to accrue capital which it hopes to pump back for rural play. Of the 23 branches opened by the bank so far, 15 are in rural areas of Madhya Pradesh. The retail expansion, especially in rural areas, will take some time as it needs to shore up capital.

Further, the bank has planned to reinvest some profits generated from wholesale and commercial banking into building its rural franchise and a personal and business banking franchise. The bank, regarding the personal and business banking has stated that it will be focused on top 50 centres as 80% of corporate and household savings rely on these 50 centres.

Presently, public sector banks are going through many concerns and are expected to remain significantly capital-constrained in the future. This has opened the doors for many private sector banks in expanding their footprint. However, success in this regard depends on the implementation of programmes by private banks. Only time will tell which ones will really benefit from this opportunity.

Infrastructure Development Finance Company Ltd (IDFC) is India's leading integrated infrastructure finance player providing end to end infrastructure financing and project implementation services. The company's main business is to provide finance for infrastructure projects including through ownership of infrastructure assets. Its scrip is currently trading down by 4.5%.