Sensex Hits a Fresh Record High; Nifty Trades above 12,100 Levels

Tue, 17 Dec 12:30 pm

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Stock markets in India are presently trading higher. The BSE Sensex is trading up by 291 points and the NSE Nifty is trading up by 81 points. The BSE Mid Cap index is trading up by 0.3%, while the BSE Small Cap index is trading up by 0.4%.

Among the sectoral indices, healthcare stocks and telecom stocks are witnessing selling pressure. Metal stocks and IT stocks are trading in green.

In the news from the pharma sector. As per an article in a leading financial daily, Lupin's subsidiary--Nanomi B.V. has completed the divestiture of the entire stake (99.8%) in Kyowa Pharmaceutical Industry (Kyowa) to Unison.

The divestiture which valued Kyowa at an enterprise value of Japanese Yen 57,361 million, was announced on 11 November 2019 and approved by Lupin's shareholders.

Lupin's share price was trading up by 0.3% at the time of writing.

In another development, Cipla has acquired the brand name and trademark rights for Vysov & Vysov M (Vildagliptin plus Metformin) of the anti-diabetic drug, Vildagliptin for the Indian market.

The company has been co-marketing Vildagliptin in agreement with Novartis under brand names Vysov & Vysov M and has witnessed a strong uptake for the product in India for the last couple of years.

It is currently available across the country. The current market size of Vildagliptin is Rs 8.2 billion as per IQVIA MAT November 2019 in India.

Cipla share price was up 1.2% at the time of writing.

Moving on to the news from the economy. Expressing concern over India's economic growth, Moody's Investors Service has lowered Gross Domestic Product (GDP) growth projection for India to 4.9% from 5.8% for FY20.

It said that the nation's weak household consumption will curb economic growth and weigh on the credit quality of Indian issuers in a range of sectors.

It added that the major factors responsible for weakening economic growth were rural financial stress, low job creation and liquidity constraints.

As per the report what was once an investment-led slowdown has now broadened into weakening consumption, driven by financial stress among rural households on the back of stagnating agricultural wage growth and constrained productivity, as well as weak job creation due to rigid land and labour laws.

Household consumption has been the backbone of India's growth, making up about 57% of GDP in FY19. Like other major markets, India's growth has decelerated, with GDP growth falling to 4.5% in Q3FY20 from 5% in Q2FY20.

The report further noted that the credit crunch among non-bank financial companies (NBFCs), the major providers of retail loans in recent years, has exacerbated this slowdown.

Moody's expects that government measures to stimulate domestic demand - including income support for farmers and low-income households, monetary policy easing, and a broad corporate tax cut will be limited in offsetting this slowdown.

Although a modest recovery is expected for next year, supported partly by spillovers from policy stimulus, economic growth will be weaker than in recent years, which will have negative credit implications for Indian issuers in a range of sectors.

In automotive, weak demand and tight liquidity will constrain automakers' earnings. Moreover, slower economic growth over the last few quarters will also reduce debt servicing capabilities of households, which in turn will weaken the asset quality of retail loans across all segments.

Note that, the Moody's indicator, is typically very late to caution on risks. So late in fact, that now it is time to look forward to the upside.

As our co-head of research, Tanushree Banerjee says, investors who take Moody's downgrade of India too seriously, will either suffer losses or miss the bus on the upside.

Take a look at this chart.

Terrible Track Record of Rating Downgrades

Every time, Moody's has slashed India's rating below the 'stable' category, the economy has bottomed out.

And a stock market boom followed.

So, smart investors who bought stocks after Moody's rating downgrade in 1992 and 2002, created life-changing wealth for themselves.

You need to do the same today.

Meanwhile, in the video below, smallcap analyst Richa Agarwal talks about the ongoing economic slowdown, an upcoming rebound in the small cap space, and her number 1 stock pick for 2020.

Tune in...

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