Persistent selling hits indices

Fri, 26 Nov Closing

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Indian indices languished in the red for a larger part of the trading session today. Although, there were some attempts made in the afternoon session to push above the dotted line, these proved futile and the markets closed well into the red in the final trading hour. While the BSE Sensex closed lower by around 182 points (down 1%), the NSE Nifty lost around 48 points (down 1%). Selling was more pronounced in midcap and smallcap stocks as the BSE Midcap and the BSE Smallcap racked losses of 4% and 3% respectively. Losses were largely seen in consumer durables, metals, auto and FMCG stocks.

As regards global markets, Asian indices closed weak today while European indices have also opened in the red. The rupee was trading at Rs 45.82 to the dollar at the time of writing.

Most food stocks closed lower today and the key losers included Nestle, ITC and Tata Coffee. As per a leading business daily, Nestle India has chalked out plans of ramping up investments in India and setting up greenfield facilities. It must be noted that the company had invested Rs 4.5 bn in 2010 taking the total capex investments to Rs 6.5 bn over the last three years. The company intends to fund its capex plans through a mix of internal accruals and debt. The fact that the company is debt free gives it sufficient headroom to borrow funds if required. This move is part of the company's strategy to continue investing in brands, distribution capabilities and capacities to capitalise on India's strong growth prospects.

As per a leading business daily, biotech drugs will be the next growth drivers going forward and many Indian pharma companies are aligning their portfolios accordingly. Infact, in the global pharma market, the top 2 drugs ‘Lipitor' and ‘Plavix', both of which are chemical entities, are set to lose patents soon and biotech drugs are set to take their place. Thus, by 2014 at least 6 of the 10 top-selling drugs sold globally are tipped to be injectable biotech drugs, mainly for treating cancer and rheumatoid arthritis, compared to 5 in 2008 and just 1 in 2000.

As a result companies such as Biocon, Dr.Reddy's, Glenmark and Cipla have been making investments in biosimilars (generic version of branded biotech drugs) to capitalise on the biotech opportunity. Biotech drugs require complex technology, are difficult to manufacture and require considerable investments as compared to chemical drugs. Hence they are niche and have the potential to generate higher revenues and profits. While the regulatory pathway in both the US and Europe is still hazy, opportunities exist in the domestic and the semi-regulated markets and Indian pharma companies have already begun launching products in these markets. While Cipla, Dr.Reddy's and Glenmark closed higher, Biocon closed in the red.