India echoes mixed Asia

Mon, 21 Dec 10:30 am

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The Indian markets have started on a volatile note. The benchmark indices opened above the breakeven mark but soon slipped into the red. They have not managed to break into the positive territory since then. Asia is currently trading a mixed bag with Taiwan (up 0.8%) leading the pack of gainers. However, Indonesia (down 2.4%) is leading the pack of losers. The US markets closed higher by 0.2% last Friday.

Currently, in India, heavyweights from the BSE-Sensex are trading a mixed bag with software and auto stocks leading the pack of gainers. However, select banking stocks are in the red currently. The BSE-Sensex is trading lower by 46 points, while the NSE-Nifty is down by 14 points. However, buying interest is being witnessed among mid and small-cap stocks as the BSE-Midcap and BSE-Smallcap indices are trading higher by 0.2% and 0.6% respectively. The rupee is trading at 46.78 to the US dollar.

Pharma stocks have opened the day on a positive note. Gainers here include Glenmark Pharma and Dr Reddy's. As per a leading business daily, Dr Reddy's plans to launch a generic version of 'Lipitor' in the US market in the next 2 to 3 years. The company has filed an application for approval from the US Food and Drug Administration for the same. It may be noted that Ranbaxy has resolved a patent dispute with Pfizer, the owner of Lipitor, and plans to launch it in the US market in November 2011 with a 180-day exclusive period. While Dr Reddy's will not get the exclusivity, we believe the size of the opportunity is still large enough for it to enter the market. After all, Lipitor is the world's largest selling anti-cholesterol medicine with annual sales of more than US$ 12 bn.

Consumer goods socks have opened the day on a positive note. Gainers here include Britannia and Nestle. As per a leading business daily, consumer goods companies are cutting quantities in their standard packs to protect their margins. Especially in the packaged foods category. Given that food prices have hit a decade's high, branded biscuits, chips and namkeens are 20% to 25% lighter while chocolates are 10% lighter at the same price. Interestingly, companies are not keen to tinker with the price points as they fear that consumers may move to regional brands. As a result companies such as Britannia, ITC, Cadbury and Nestle have increased their focus on price points of Rs 2, 3, 5 and 10 over the past six months in order to push volumes. In our view, the companies have little choice given that the unorganised sector is almost as big as the organised sector in this category and has deeper penetration in the key regional markets.