Led by weakness in oil & gas and banking stocks, the Indian markets turned extremely volatile during the final hour of trade today with the benchmark indices closing in the red. On the BSE, there was one stock that gained for every stock that closed in the negative.
The BSE-Sensex and the NSE-Nifty closed with losses of around 50 points (0.3%) and 10 points (0.2%) respectively. Stocks from the mid and small cap spaces however bucked the trend, as the BSE-Midcap and BSE-Smallcap indices gained by around 0.3% and 0.8% respectively. The rupee was trading at 46.19 to the US dollar at the time of writing.
Apart from India, other Asian markets that fell today were Hong Kong (down 0.6%), Singapore (0.7%) and Japan (0.6%). European markets have opened on a positive note.
Today's Wall Street Journal caries an interview with the Tata Group chairman Mr. Ratan Tata. Herein, amongst other things, he talks about the acquisitions of Corus and Jaguar (JLR), and the group's succession plans. On the two big acquisitions made by Tata Motors and Tata Steel respectively, Mr. Tata has clarified his stand saying, "My view on that is that if you want to buy a house and that house is of a particular value, then it may not be there if you wait. On that basis, we bought those two companies. Corus gave us presence and scale which it would be difficult to achieve in India over the next eight years. JLR gave us international brands which we would have taken many, many years and many billions of dollars to establish in those countries."
We fully agree with Mr. Tata. While we see Corus plugging a gaping hole in Tata Steel's downstream technology in the steel business, we expect JLR to benefit Tata Motors with its world class automobile manufacturing technology. While these deals won't really be value creators in the short run, investors would do well to assess the value creation that we expect will happen over the next few years. Anyways, stocks from the group closed strong today. Major gainers included the likes of Tata Motors,Tata Steel and Voltas.
In what could be concerning to those that give a lot of weight to foreign money inflows to make their own investment decisions into stocks, this news might bring in some disappointment. As per the Financial Express, the Indian government while claiming that the surge in FII inflows is not yet concerning, will be keen to take action if things heat up out there. "It is not a matter of concern we have a system of monitoring. Whenever we find that there are some distortions we have the arrangement to counter it therefore it is not disturbing," says the Finance Minister Pranab Mukherjee. As a matter of fact, FIIs have already invested around US$ 16 bn into Indian stocks since January 2009, one of the highest inflows in any given year.
Pharma major Cipla ended the day amongst the top gainers on the NSE-Nifty. The stock has in fact gained handsomely over the past few days. This has seemingly been fuelled by the company's launch of a new drug to fight the H1N1 virus. Cipla's drug is a generic version of Roche's Tamiflu and the former is marketing under the brand name ‘Antiflu'. As was recently reported in a leading business daily, Cipla has so far earned US$ 10 m in sales from this drug by exporting to countries in Latin America, Africa, Middle East, and South East Asia. It has also offered to supply the same to the regulated markets of the US and Europe, given that these countries are facing severe shortage of this drug.
We believe that Cipla's focus on contract manufacturing shall gather momentum in the future keeping in mind the global generics potential especially in FY12 when the number of drugs going off patent is considerable. In the domestic market, the company is likely to maintain its strength with its strong field presence and strong brands. Having said that, the company's minimal focus on R&D is likely to weigh heavy on its overall growth over the long run.
