Indices stage a smart recovery

Fri, 24 Dec Closing

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Although the Indian indices languished in the red in the morning session, strong buying activity post noon pushed them well above the dotted line. This momentum was sustained in the final trading hour as well and led the markets to close well into the positive. While the BSE-Sensex closed higher by around 91 points (up 0.5%), the NSE-Nifty gained around 32 points (up 0.5%). The BSE Midcap and the BSE Smallcap also did well to notch gains of 0.3% each. Gains were largely seen in FMCG, healthcare and metals stocks.

As regards global markets, most Asian indices closed in the red today. Most European markets were shut today on account of Christmas Eve. The rupee was trading at Rs 45.10 to the dollar at the time of writing.

Sun Pharma closed 3% higher today and was the lead gainer among pharma stocks. The stock in recent times has been on the investors’ radar. The company did reasonably well during 2QFY11 wherein sales and profits grew by 16% YoY and 11% YoY respectively. Further, the uncertainty surrounding the Taro acquisition came to an end when the Israeli Supreme Court ruled in Sun Pharma’s favour. Now with Taro’s financials being clubbed with that of Sun Pharma’s, the latter’s sales are expected to ramp up during FY11. Moreover, recently, a US appeals court ruled a case in favour of Sun Pharma involving the cancer drug ‘Eloxatin’. The company was up against Sanofi-Aventis SA, which had appealed for barring Sun Pharma to market the generic version of the drug in the US.

IT stocks closed mixed today. While Wipro and Infosys found favour, Mahindra Satyam and HCL Tech closed in the red. Indian IT companies seem to be at the receiving end again. A new US healthcare law has been passed by the American government that seeks to create a US$ 4.3 bn fund. This is to provide free medical treatment to those suffering from illnesses contracted while clearing the debris in the aftermath of the 9/11 terror attack in New York. For this, it is looking to raise funds by raising visa fees for skilled workers from India, China and Thailand. While the law applies to skilled labour from various industries overseas, Indian IT sector is likely to be impacted the most. This is given that companies from this sector earn about 60% of their revenues from exports to America.

Rising oil prices has stoked fears of inflation once again. Oil has climbed 30% from this year’s low in May and concerns are emanating that this could impact economic growth especially of oil importing countries including India. Europe has been bogged down by snow and freezing temperatures as a result of which demand for the fuel has surged. Meanwhile, the OPEC intends to contemplate raising oil production if oil prices go beyond the US$ 100 per barrel mark. Oil prices had peaked in the latter half of 2008 before the global financial crisis caused commodity prices to cool off. India, so far, has been insulated from oil price hikes due to subsidies and it will be interesting to see what the government chooses to do in the event prices rise considerably.