Indian Markets Tuesday Wrap-Up: IMF Calls for Higher Government Spending

After a weak opening on the back of negative global cues, markets slipped into a downward spiral for the entire day. The Sensex closed lower by around 250 points, while the Nifty closed lower by 70 points. Stocks from the mid-cap and small-cap indices also ended in the negative territory. Stocks from the realty and consumer goods sectors saw the most selling in today’s trade. Rupee closed at 48.88 against the US dollar. While Asian markets closed mixed, the European indices are trading in the green currently.

As per a leading business daily, Shopper’s Stop has deferred its plans to acquire an additional 32% stake in Hypercity Retail by two years. Shopper’s Stop had acquired a 19% stake in Hypercity Retail, out of an option of 51% available to it. The company had the option of acquiring the additional 32% by December 2008. However, considering the current scenario of liquidity crunch, Shopper’s Stop requested the promoters of Hypercity to provide an extension till June 2010. The same has been granted. The company had earlier planned to raise Rs 5 bn to partly fund its expansion plans that also included increasing its stake in Hypercity. Stocks from the retail sector closed mixed with the major gainer being Shopper’s Stop and Trent, while Pantaloon and Titan Industries closed in the red.

On the BSE Sensex except for Lupin, pharma stocks closed in negative territory. Piramal Healthcare, Ranbaxy, Biocon and Dr. Reddy’s led the pack of losers. As per a leading business daily, Lupin is shifting its focus from herbal leads to true chemicals, including small and large molecules and biotechnological drugs. For the new drug discovery programme, the company plans to make India its hub.

The move comes as the company prepares itself for a slew of possible legislation in the US to launch cheap biological drugs. The company currently plans to focus on new biological entities and biosimilars and hence created a dedicated biotechnology cell last year. The company is also expanding its ‘Suprax’ franchise. ‘Suprax’ is a branded generic drug and is now worth US$ 30 m. The company is following a two-pronged business strategy for the US market. This includes building brands and strengthening its generic portfolio. This will ensure growth in revenues from the highly competitive US market.

Toyota (TM) is facing an overcapacity problem for the first time due to the worst U.S. auto market since the early 1990’s. It may force Toyota Motors to cut its North American payroll. It may be noted that the company has not laid off workers in 24 years of manufacturing cars in the U.S. But now unsold inventory has piled up even after cutting production. Thus, the company is considering layoffs in a move to trim costs.

IMF chief Dominique Strauss-Kahn has told BBC radio that the IMF may need to cut its next economic growth forecasts, due in January, referring to “2009 as really being a bad year”. He believes the insufficient fiscal stimulus by governments to tackle the global slowdown may make a bad 2009 even worse. In fact, the IMF has called for higher government spending and temporary tax cuts worth US$ 120 trillion or 2% of global annual economic output to stimulate global economic growth and fill the gap caused by slumping private demand following the credit crunch.