Sensex Finishes on a Dull Note; Pharma & Banking Stocks Drag

Tue, 20 Dec Closing

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Indian share markets continued to trade flat with negative bias in the afternoon session amid mixed international markets. At the closing bell, the BSE Sensex stood lower by 67 points, while the NSE Nifty finished down by 22 points. Meanwhile, the S&P BSE Mid Cap & the S&P BSE Small Cap finished down by 1.4% and 0.9% respectively. Losses were largely seen in <>pharma, banking and PSU stocks.

Asian shares traded mostly higher with the exception of China and Hong Kong as continued capital outflows from the country weighed on sentiment. Japan's Nikkei 225 gained 0.53% after the Bank of Japan kept monetary policy steady and offered a brighter view of the economy. While, the Shanghai Composite & the Hang Seng fell 0.49% and 0.47% respectively. European markets are mixed. The CAC 40 is higher by 0.20%, while the FTSE 100 & the DAX are down 0.21% and 0.06% respectively.

The rupee was trading at 67.90 against the US$ in the afternoon session. Oil prices were trading at US$ 53.23 at the time of writing.

According to a leading financial daily, Glenmark Pharmaceuticals is planning to spend US$ 100 million each over the three years period towards capital expenditure. The company plans to expand existing units and increase their footprints in the global market.

The company is reportedly spending 9-10% on research and development and now looking at spending 11% of sales in the coming years. The firm is also looking at CAGR of 15-20% topline growth over the next 5 years period.

The US and India are the major markets for the company, accounting for 60% of sales currently. Over the next four-five years, the company plans to file 20-25 abbreviated new drug applications (ANDAs) with the US Food and Drug Administration annually and launch around 20 products.

Glenmark has set a revenue target of US$200-250 million from the US sales of its generic version of the anti-cholestol drug Zetia, which was launched last week. The management adds that initial traction has been in line with the target.

Even as it pushes to recover money stuck due to Venezuela's financial crisis, Glenmark says it continues to grow in other Latin American markets like Mexico, Brazil and Argentina. Meanwhile, the company's Indian domestic business has consistently grown faster than the broader market. The Indian government's move to demonetise high value currency notes in early November has not affected business yet.

Glenmark Pharma's share price finished the trading day down by 0.6% on the BSE.

Meanwhile, according to a report by agency rating company ICRA, Indian pharmaceutical industry will grow at a slower pace due to sluggish growth in the US market.

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.

Besides, increased regulatory scrutiny and consolidation of supply chain in the US market resulting in pricing pressure along with increased R&D expenses will have an impact on profitability of Indian pharmaceutical companies.

In another development, according to an article in Livemint, sales of consumer durables and appliances have declined around 40% since the government withdrew Rs 500 and Rs 1000 banknotes on 9 November. Leading consumer goods firms have postponed new launches and stalled or slashed expenditure on marketing in the December quarter.

Makers of durable goods are launching new schemes to tempt consumers to go cashless. Some of them are also extending discount offers and promotions such as waiver of processing fees and instalment schemes with delayed start of payments. At this stage, no manufacturer will consider raising prices since the market is down.

Reportedly, demonetisation has taken a toll on the sales of the retailer like Croma, eZone and Next Retail, all of whom are now tightening their budgets when it comes to buying fresh inventory from companies such as LG, Samsung, Godrej and Voltas. Business was down around 40% in November and the trend is almost the same even this month.

Moreover, companies that were expecting a 30% growth on improved household income, backed by a good monsoon and the Seventh Pay Commission, are now expecting to settle at a maximum 15% growth for the full fiscal year if demand picks up next quarter.

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