India up despite weak Asia

Tue, 8 Dec 10:30 am

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The Indian markets have started on a positive note as the benchmark indices opened slightly below the breakeven mark but have marched upwards from the dotted line since then, despite weak Asian cues. Asia is currently trading in the red with China (down 1.3%) leading the pack of losers. The US markets closed marginally higher yesterday.

Currently, in India, heavyweights from the BSE-Sensex are trading a mixed bag with metal, auto and power stocks leading the pack of gainers. However, select banking stocks are in the red. The BSE-Sensex is trading higher by 83 points, while the NSE-Nifty is up by 21 points. Buying interest is also being witnessed among mid and small-cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.7% and 0.8% respectively. The rupee is trading at 46.49 to the US dollar.

Energy stocks have opened the day on a strong note. Gainers here include HPCL and BPCL. As per a leading business daily, ONGC's overseas investment arm OVL is in talks to set up a refinery in Nigeria. The 180,000 barrels per day greenfield project will be executed by ONGC-Mittal Energy (OMEL), the joint venture between OVL and Lakshmi Mittal's Mittal Investment Sarl. In return, OMEL has already been given two hydrocarbon blocks. While this arrangement had been entered into a few years back, it has received fresh support from India's oil ministry. It may be noted that India and China are trying to secure oil and gas assets worldwide in order to address their burgeoning needs. Hence, we find India putting its diplomatic weight squarely behind state owned oil companies like ONGC and Indian Oil in their overseas forays.

Pharma stocks have opened the day on a mixed note. Gainers here include Indoco Remedies and Dishman Pharma, while Cipla is in the red. As per a leading business daily, the government plans to expand the national list of essential medicines (NLEM) for the first time since 2003. It closely tracks the prices of NLEM drugs and plans to bring them under price control. This would increase the share of drugs under price control from 20% to 35% of the Indian pharma industry. Price controls are meant to keep medicines affordable for the poorer sections of the society.

In our view, the flip side is that they keep profitability low and discourage further investment into the sector especially from multinational pharma companies like Pfizer and Aventis. A better strategy would be to provide subsidies for those who cannot afford the medicine.