Sensex Trades Weak; Auto & Consumer Durable Stocks Drag

Mon, 12 Dec 01:30 pm

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The Indian share markets continue to trade in the negative zone following weak Asian cues. Sectoral indices are trading on a mixed note with infrastructure, power and capital goods stocks leading the pack of gainers. Whereas, auto and consumer durables stocks heading the losers.

The BSE Sensex is trading lower by 169 points while the NSE Nifty is trading lower by 62 points. The BSE Mid Cap index is trading down by 0.7% while BSE Small Cap index is trading down by 0.3%. Gold prices, per 10 grams, are trading at Rs 27,576 levels. Silver price, per kilogram is trading at Rs 41,221 levels. Crude oil is trading at Rs 3,474 per barrel. The rupee is trading at 67.58 to the US$.

Pharma stocks are trading on a mixed note with Elder Pharma and Glenmark Pharma leading the gains. According to an article in The Economic Times, Strides Shasun Limited have signed an agreement to acquire the entire shareholding in Maharashtra based Perrigo API India for Rs 1000 Million.

The deal is part of a strategy to build a backward integrated portfolio of niche and small volume products for the regulated markets. Moreover, the firm has been trying to strengthen its active pharmaceutical ingredients (API) facilities since 2014, when Strides Arcolab Ltd merged with Shasun Pharmaceuticals Ltd in a US$221 million transaction to create the entity Strides Shasun Ltd.

Under the terms of agreement, Strides Shasun will acquire 100% of the issued capital of Perrigo API India. Also, Perrigo parent or affiliates will continue to source few products from the facility under a long term supply agreement.

One must note that, this is the second acquisition that Strides has made since the last fortnight. In November, its wholly owned subsidiary Strides Arcolab International acquired Pediacare from Moberg Pharma for US$5 million plus inventory. Similarly, in March, Strides Shasun acquired three brands of Moberg Pharma for Rs 670 million, to strengthen its Over the Counter (OTC) drug offerings globally.

In another development, according to a report by rating agency ICRA, Indian pharmaceutical industry will grow at a slower pace due to sluggish growth in the US market. Increased competition leading to price erosion in high single digits and generic adoption reaching saturation levels also contribute to the factors.

Domestic Pharmaceutical Market Growth in September Quarter

The market grew 12.8% in the September quarter compared with 6.7% in the June quarter. Both volumes and new products contributed to higher growth in the quarter. The pharma sector's revenue rose 14.9% over the year ago. The sales rose 14.3% and other operating income by 81.3%. The sector's sales growth was lower than the preceding quarter's 17.5% growth and 16% in the March quarter, the reports noted.

Reportedly, the ban on fixed dose combination drugs (Subscription Required) was another event that affected sales. Growth from the US has come down to less than 9% in first half of 2016-17 despite consolidation and currency benefits and going forward, the growth momentum is likely to face further pressure. However, On the bright side, profitability remained firmly in the pink of health.

Moving on to the news from stocks in consumer durables sector. Life Insurance Corporation (LIC) has hiked its stake in footwear major Bata India Ltd. by 2.03%, taking its total shareholding to 7.05% in the company.

Reportedly, LIC has bought 26.11 lakh shares from open market during January 20 to December 8, in this year. LIC had 5.02% stake in Bata India earlier.

The transaction comes at a time when the shoe retail major has delivered unimpressive results for the September quarter with earnings degrowth. And it may suffer downgrades in times of demonetization. For the quarter ended September, Bata India reported a 36.35% fall in net profit to Rs 345.9 million as against a net profit of Rs 543.5 million in the year-ago period.

While consumer stocks are still suffering from a prolonged slowdown in consumer sentiments, demonetization has posed its own set of problems. Sectors whose revenues have been hit the hardest by demonetisation have seen the biggest declines in their stock prices. Besides real estate, Consumer durables too have been decimated.

Bata India was trading up by 0.4% at the time of writing.

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