Indices continue to trade with marginal gains in morning deals

Indian equity benchmarks continued to trade with marginal gains in morning deals, led by gains in ONGC, Power Grid Corporation and Asian Paints despite a weak trend in global markets.  Sentiments remained positive with S&P Global Ratings’ report stated that India will be one of the fastest growing emerging market economies with a 10 percent growth in FY22, and future sovereign rating action would hinge on lowering fiscal deficit and sustaining debt burden. It noted that the forecast for India in 2021 is on stronger side and shows that a lot of economic activity, which was frozen last year, is coming back on line to normalisation thereby brightening the growth prospects, as well as structural strengths of Indian economy coming back to the fore. Some support also came with commerce and Industry Minister Piyush Goyal’s statement that he will engage with the new United States Trade Representative (USTR) for a fresh trade package as both the countries would have to look afresh at different ideas.

On the global front, Asian markets were trading mostly in red after strong U.S. economic data released overnight dampened the argument that the economy still needs massive stimulus. Separately, the Australian Bureau of Statistics said that the jobless rate in Australia came in at a seasonally adjusted 6.4 percent in January. That was beneath expectations for 6.5 percent and down from 6.6 percent in December. Back home, on the sectoral front, select telecom equipment manufacturing stocks were trading in green as the government approved a Rs 12,195 crore production-linked incentive (PLI) scheme for telecom gear manufacturing in India. This move will position the nation as a global powerhouse for production of such equipment ahead of 5G roll-outs.

The BSE Sensex is currently trading at 51765.85, up by 62.02 points or 0.12% after trading in a range of 51652.67 and 51903.96. There were 19 stocks advancing against 11 stocks declining on the index.

The broader indices were trading in green; the BSE Mid cap index rose 0.98%, while Small cap index was up by 1.18%.

The top gaining sectoral indices on the BSE were Oil & Gas up by 3.71%, Utilities up by 3.56%, PSU up by 2.98%, Power up by 1.74% and Metal up by 1.39%, while Telecom down by 0.32%, Bankex down by 0.22% and Auto down by 0.04% were the few losing indices on BSE.

The top gainers on the Sensex were ONGC up by 5.33%, Power Grid Corporation up by 3.41%, Asian Paints up by 2.46%, SBI up by 2.34% and NTPC up by 1.71%. On the flip side, Kotak Mahindra Bank down by 1.43%, Mahindra & Mahindra down by 1.42%, ICICI Bank down by 1.42%, Bajaj Finance down by 1.30% and Titan Company down by 1.20% were the top losers.

Meanwhile, India Ratings and Research (Ind-Ra) has said that it does not expect Indian pharmaceutical companies to sustain the healthy operating margins reported during 3Q FY21 and 9M FY21. It mentioned that the India formulations business grew year-on-year (yoy) during 3Q FY21 and 9M FY21 while growth across other segments was lower both on quarter-on-quarter (qoq) and yoy basisIt witnessed stable EBITDA margins on a quarterly basis as revenue increase gained momentum in India formulations business, attributed to Covid-19 related products while product launches aided the US business' margins. It highlighted the EBITDA margins expanded around 300 basis points yoy during 3Q while they have started tapering off on a qoq basis due to elevated operating expenses as cost savings in lieu of the digital initiatives undertaken during 1H FY21 have not been sustainable.

The healthy performance during 3Q FY21 is attributed to improving revenue growth in key geographies of India and the United States with cost optimisation initiatives continuing albeit with lower intensity. The India business growth was led by the increased number of prescriber interactions with patients and increased sales and marketing activities by pharmaceutical companies with unlocking and higher sales of Covid related products. Growth was also led by continued outperformance of chronic therapies. The higher growth witnessed in other segments (US, API, RoW) during 2Q FY21 has started normalising due to increasing competitive intensity with the unlocking of economic activities. While currency depreciation impacted growth in key RoW markets (Brazil, Russia), API business has started normalising with lower pricing and pre-buying benefits.

As the unlock phase gains momentum due to vaccinations, it expects India business to revert to its historical growth of 8 to 10 per cent over the medium to long term while the US generic business to see a 4 to 5 per cent annualised price deflation. It also expects the RoW markets to witness volume growth in double digits as the vaccination drive accelerates in these markets. The analysis is based on the reported segmental results of 13 large pharma companies.

The CNX Nifty is currently trading at 15240.15, up by 31.25 points or 0.21% after trading in a range of 15199.95 and 15250.75. There were 35 stocks advancing against 15 stocks declining on the index.

The top gainers on Nifty were ONGC up by 5.77%, GAIL India up by 5.65%, Power Grid Corpn. up by 3.22%, Indian Oil Corporation up by 3.11% and SBI up by 2.67%. On the flip side, Mahindra & Mahindra down by 1.51%, Kotak Mahindra Bank down by 1.51%, ICICI Bank down by 1.42%, Bajaj Finance down by 1.29% and Titan Co down by 1.23% were the top losers.

Asian markets were trading mostly in red; Straits Times trembled 12.22 points or 0.42% to 2,908.21, KOSPI fell 31.29 points or 1% to 3,102.44, Nikkei 225 slipped 52.64 points or 0.17% to 30,239.55 and Hang Seng decreased 361.11 points or 1.16% to 30,723.83.

On the flip side, Taiwan Weighted strengthened 46.95 points or 0.29% to 16,409.24, Jakarta Composite soared 21.85 points or 0.35% to 6,249.58 and Shanghai Composite gained 14.33 points or 0.39% to 3,669.42.