The Hindu : Pharma shares in limelight

Online edition of India's National Newspaper
Monday, Jul 07, 2003

Business

Business

Pharma shares in limelight

PHARMA SHARES hogged the limelight last week. Marketmen attributed the rally to sustained buying by foreign institutional investors and reports that the U.S. would soon liberalise the introduction of low-cost generic drugs. The steps taken by the U.S. Government will enable Indian generic drug makers to launch their products faster in America. Indian pharma majors with established operations in the U.S. and alliances with U.S. generic companies will stand to gain. The potential of the huge generic market for Indian companies has fuelled interest in the sector.

Ranbaxy firmed up after the company announced that it had received approval from the U.S. Food and Drug Administration to manufacture and commercialise its Ganciclovir capsules. Divi's Lab rose on receipt of European approval for two of its products. Other pharma scrips such as Dr. Reddy's, Cipla and Cadila Healthcare also looked up on sustained buying support.

During the week, the BSE benchmark 30-share index moved between 3661.99 and 3584.73 before closing at 3622.34 against the previous weekend close of 3583.06, a net gain of 38.28 points.

Steel stocks surged ahead on expectation of another round of price hikes, rising global prices and higher demand from China. Essar Steel, SAIL and Tata Steel moved up. In automobiles, Telco gained on hopes of excellent sales numbers for June and on reports of a better than normal monsoon. In two-wheelers, Bajaj Auto and Hero Honda slipped despite reporting higher bike sales in June. Cement stocks attracted fresh buying and closed higher.

On Friday, FMCG major Hindustan lever witnessed heavy selling by hedge funds. Domestic funds led by Life Insurance Corporation also reportedly pressed heavy sales at higher levels.

Foreign institutional investors (FIIs) remained net buyers to the tune of Rs. 663 crores in the first four sessions of the week, taking the total net investment to Rs. 6,710 crores for the current year. Both operators and foreign funds continued their buying spree but resistance came in the form of selling by select hedge funds and domestic mutual funds that remained net sellers during the year.

Banking stocks remained firm on the back of institutional support. But the market witnessed some more profit booking in this sector especially State Bank of India at the fag end of the week.

The rally was offset by heavy selling in the IT sector. Sentiment in technology stocks turned bearish towards the end of the week as there was an overnight fall in the U.S. markets. There are concerns that billing rate pressures, competition from MNCs, and appreciation of the rupee would put pressure on the margins of IT companies. But marketmen expect a better performance from IT bellwether Infosys which is scheduled to release its April-June performance on July 10. i-flex firmed up to touch a new high as the board had approved a bonus issue in the ratio of one share for every equity share held and a hike in investment limit for FIIs. Select technology stocks such as Aftek, Infosys, NIIT and SSI were pretty strong.

There was a smart rally in refinery stocks in the public sector after the news that IOC might offload its stake in GAIL and ONGC. IOC announced on Friday that it had signed a tie-up with Total of France for marketing diesel and petrol additives and research and development. Its decision to swap high cost debt to the tune of Rs. 1,200 crores with cheaper loans will bring down the interest burden substantially. HPCL and BPCL closed the week at Rs. 358 and Rs. 291 respectively.

On disinvestment hopes, Rashtriya Chemicals and Fertilizers and Punjab Tractors rose to new 52-week highs.

Reliance Industries ended with a modest gain after its telecom venture, Reliance Infocomm, activated 2.5 lakh connections within two days of launching its `Monsoon Hungama' offer. The directors will be meeting on July 30 to consider the unaudited financial results for the first quarter.

The market undercurrent continues to be strong. But brokers expect some correction this week. The listing price of Maruti Udyog and the performance of tech major Infosys are expected to have a triggering effect on the bourses.

Rupee at new peak

The rupee ended the week at a 33 month high of 46.33/34 a dollar. Capital inflows and large dollar supplies were the principal reasons. Meanwhile, there are conflicting signals from the U.S., with the periodic economic data not pointing to any firm trend in economic recovery. Over the short-term, supply-demand factors will be the crucial determinant.

Debt market easy

The debt market remained easy with high liquidity. The outflow of Rs. 12,000 crores towards Government borrowing during the week did not affect the market. The placement of funds with the Reserve Bank of India under repo amounting to about Rs. 39,000 crores, a barometer of liquidity in the banking system, indicates no sign of hardening of interest rates in the near future. The 10-year government security was traded at 5.72 per cent and the 5-year security at 5.30 per cent on Friday, not much changed from previous weekend rates. While the next Government borrowing is to take place in the third week of this month, the market is expecting the RBI to mop up the excess liquidity by selling securities from its stock through open market operations.

By Our Bureau

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