Indian indices hold on to gains

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Asian stock marketsIndian equity markets had a volatile trading session today. While the indices notched strong gains in the earlier hours, profit booking intensified at higher levels pushing them towards break even. However, post noon, buying across heavyweights once again gained momentum and the final hours were witness to markets consolidating gains. While the Sensex today closed higher by 57 points, the NSE-Nifty today closed higher by 13 points. Both the BSE Mid Cap and the BSE Small Cap closed marginally into the positive. Gains were largely seen in IT and FMCG stocks.

As regards global markets, most Asian indices closed firm today while European indices have also opened in the green. The rupee was trading at Rs 55.21 to the dollar at the time of writing.

Pharma stocks closed mixed today. While GSK Pharma and Glenmark found favour, Cipla, Sun Pharma, Sanofi India and Novartis closed in the red. As per a leading business daily, a new pricing mechanism seems to have been finalized by the group of ministers (GoM) which could lead to a sharper reduction in prices of drugs. The new formula will take into account 'the simple average method' for determining the ceiling price of all the molecules under a particular therapeutic area as against the 'weighted average' method cleared in September by GoM. The draft policy had capped the price by taking the weighted average of all the drugs in a particular segment with more than 1% market share. It is estimated that the average price reduction on the 348 essential drugs may be around 25-30%. This has yet to be taken to the Cabinet for approval. The pricing policy when it comes to force is bound to have an impact on both domestic and MNC pharma companies as both have a presence in the Indian pharma market. However, the impact is likely to be higher for MNC pharma companies. This is because most of them are entirely focused on the domestic market unlike domestic pharma companies which have revenues coming from the export markets as well.

ONGC Videsh Ltd (OVL), the overseas arm of Oil and Natural Gas Corporation (ONGC), is looking to raise about US$ 1 bn through the issue of dollar bonds in 2013. This is to fund its overseas buy of Hess' stake in the oil fields in Azerbaijan for US$ 1 bn. Majority of OVL's funding earlier had been through its parent ONGC, but the rationale behind going in for dollar bonds is because dollar debt is cheaper than the rupee. It must be noted that OVL earlier had acquired Hess Corporation's 2.72% in oil fields in the Azerbaijan part of the Caspian Sea, and 2.36% interest in the Baku-Tbilisi-Ceyhan Pipeline (BTC) for US$ 1 bn. This would be OVL's first foray into Azerbaijan which is rich in oil. It must be noted that India imports around 70% of the oil that it consumes which has been putting pressure on the country's deficit. As a result, many of India's energy companies are increasingly looking to acquire stakes overseas with the aim of ensuring energy security of the country. The stock closed lower today.