Benchmarks cut back losses tailing recovery of pharmaceutical stocks

Benchmarks have trimmed some losses tracing the recovery of Pharmaceuticals stocks after the Department of Pharmaceuticals has withdrawn guidelines issued by it on May 29 which gave National Pharmaceutical Pricing Authority (NPPA) the powers to fix the prices of drugs that are not on the essential medicines list in response to a plea filed by an organization of drug manufacturers challenging the drug regulator’s July 10 notification that brought over 100 medicines under price control. Further, lower level buying which also crept in at day’s lowest point also led to some recovery at Dalal Street, despite this the sentiment continues to remain downbeat on the back of pessimistic global cues. Off day’s low, both Sensex and Nifty were trading above crucial 27,100 and 8,100 levels respectively, with losses of around three tenths of a percent. Meanwhile, broader indices also reeling under pressure were trading with losses of around three tenths of a percent.

On the global front, Asian shares continue to reel under pressure after a reading on China’s massive factory sector outpaced the market’s bleak expectations. The HSBC flash reading on manufacturing (PMI) for September rose to 50.5 from 50.2 in August and confounding forecasts for a dip to 50. Meanwhile, European shares fell in early trade on Tuesday, adding to the previous session’s pull-back as data showing French business activity contracting again in September rattled investors.

Closer home, besides the recovery of pharmaceuticals stocks, losses of bourses also were minimized tracing the splendid gains of Information Technology, FMCG and Consumer Durable counters. On the flip side, stocks from Realty, Oil & Gas and Capital Goods counters were the prominent losers of the session. IT stocks were in demand on account of rupee weakness against dollar, while losses of realty counter was led by shares of DLF which plunged after esteemed brokerage house downgraded the rating of stock to 'reduce' from 'hold'. The overall market breadth on BSE was in the favour of declines which thumped advances in the ratio of 1635:1095; while 107 shares remained unchanged.

The BSE Sensex is currently trading at 27124.89, down by 81.85 points or 0.30% after trading in a range of 27065.21 and 27256.87. There were 13 stocks advancing against 17 stocks declining on the index.

The broader indices were trading in red; the BSE Mid cap index was down by 0.35%, while Small cap index down by 0.32%.

The gaining sectoral indices on the BSE were IT up by 0.60%, FMCG up by 0.56%, Consumer Durables up by 0.55%, TECK up by 0.27% and Power up by 0.10% while, Realty down by 2.63%, Oil & Gas down by 0.86%, Capital Goods down by 0.78%, Metal down by 0.74% and INFRA down by 0.72% were the losing indices on BSE.

The top gainers on the Sensex were Wipro up by 1.74%, Hindustan Unilever up by 1.29%, Maruti Suzuki up by 1.24%, ITC up by 0.76% and Hero MotoCorp up by 0.74%. On the flip side, Tata Motors down by 1.74%, Hindalco down by 1.70%, Cipla down by 1.57%, Mahindra & Mahindra down by 1.48% and Coal India down by 1.28% were the top losers.

Meanwhile, in a bit of the relief to the pharmaceutical industry, the Department of Pharmaceuticals has withdrawn guidelines issued by it on May 29 which gave National Pharmaceutical Pricing Authority (NPPA) the powers to fix the prices of drugs that are not on the essential medicines list in response to a plea filed by an organization of drug manufacturers challenging the drug regulator’s July 10 notification that brought over 100 medicines under price control.

The industry, which off-lately has been baffled by the increasing number of medicines adding to the list of essential medicines, strongly protested against this matter of fixing price cap for non essential drugs. Despite this, reports suggests that the decision to withdraw the drug pricing authority's powers to fix the prices of non-essential medicines will be on a prospective basis, and will not affect price caps imposed in July on 108 drugs.

NPPA had taken the industry by surprise on July 10, when it invoked the rarely used clause of Paragraph 19, which allows price control outside of the list of essential medicines under extraordinary circumstances and imposed price caps on 108 non-essential drugs, which are used to treat diseases ranging from diabetes to HIV/AIDS. The move of price control was driven by huge inter-brand price difference seen in most drug categories. NPPA had used the term 'exploitative pricing' for such situations where medicines become unaffordable or hugely expensive for patients, in a market which pays out of pocket.

However, the industry bodies had taken representations to the government, opposing the order and pressure had been building up on the drug regulator. Both Indian drug lobbies Indian Pharmaceutical Alliance and MNC group Organisation of Pharma Producers of India had legally challenged the order in separate petitions, questioning the use of Para19 and NPPA's jurisdiction to carry out the order.

The CNX Nifty is currently trading at 8120.20, down by 26.10 points or 0.32% after trading in a range of 8106.25 and 8159.75. There were 18 stocks advancing against 32 stocks declining on the index.

The top gainers on Nifty were Wipro up by 1.75%, HCL Tech. up by 1.51%, Hindustan Unilever up by 1.46%, Ultratech Cement up by 1.37% and Grasim Industries up by 1.17%. On the flip side, DLF down by 4.50%, Tata Motors down by 1.89%, Hindalco down by 1.79%, Mahindra & Mahindra down by 1.70% and Cipla down by 1.59% were the top losers.

Asian pacific shares too were trading mostly negative; Straits Times trading higher by 8.61 points or 0.26% to 3,305.18; Shanghai Composite advancing 19.85 points or 0.87% to 2,309.72. On the flip side, Nikkei 225 was trading lower by 115.27 points or 0.71% to 16,205.90; Taiwan Weighted down by 49.75 points or 0.54% to 9,084.90; Hang Seng down by 32.52 points or 0.14% to 23,922.97; Jakarta Composite down by 30.62 points or 0.59% to 5,189.18; KOSPI Index down by 10.36 points or 0.51% to 2,028.91 and FTSE Bursa Malaysia KLCI down by 4.88 points or 0.26% to 1,841.

European markets to got off to a sluggish start; with Germany’s DAX trading lower by 41.8 points or 0.43% to 9,707.74; UK’s FTSE 100 declining by 35.32 points or 0.52% to 6,738.31 and France’s CAC shedding 26.17 points or 0.59% to 4,416.38.