Indian Markets Wednesday Wrap-Up: In Line with Asian Peers

Although the Indian markets pared some gains during the final hour of trade, they managed to end the day well above the dotted line. The BSE-Sensex ended higher by around 340 points, while the NSE-Nifty closed higher by about 105 points. Stocks from the mid-cap and small-cap spaces ended the day on a positive note as well, recording gains of around 1.6% and 0.3% respectively. Barring stocks from the realty sector, buying activity was witnessed in stocks across the board, led by power, capital goods and consumer durables.

Other Asian markets ended the day on a firm note today. The European indices are currently trading in the green. Rupee was trading at 47.3 against the US dollar at the time of writing.

Pharma stocks ended the day on a strong note led by Dr. Reddy's, Ranbaxy, Glenmark Pharma and Cipla. The stock of Dr. Reddy's was amongst the top gainers amidst its peers on the announcement of it receiving the USFDA's (US Food and Drug Administration) approval for its Abbreviated New Drug Application (ANDA) for Omeprazole Mg OTC. This drug is used for treating heartburn. It may be noted that the company's filing for this product was under litigation and in the US, courts had ruled in favour of Dr. Reddy's, granting it the exclusivity period. 'Omeprazole OTC' generated annual sales of approximately US$ 362 m in the US as of July 2008.

Software stocks ended the day on a firm note led by NIIT, Tech Mahindra, HCL Tech and Wipro (WIT). As a fallout of the downturn, the BPO space is likely to see increased globalisation with BPO companies fishing for newer verticals and geographies. To spur growth it has become important to move up the value chain by providing more sophisticated services to the customer. The Indian BPO industry, growing at a CAGR of 37% over the last seven years, clocked in revenue of almost US$ 15 bn during FY09. But most of the revenue came from the US and was concentrated in the BFSI segment. As the US economy is worst hit by the global recession, it is high time that the sector starts looking at newer pastures. It is also altering its onshore-offshore mix for better bottom-lines. Nasscom President, Mr. Som Mittal has predicted the US$ 50 bn Indian IT-ITeS industry will reach US$ 225 bn by 2020 with 80% of the growth coming from non-traditional geographies and markets like telecom, government sector, amongst others. The sector also saw an effort to rationalise cost-structures which will boost the operating efficiency. There are also challenges from countries like China and Brazil as traditional cost-arbitrage is no longer the key driver for success. A better value-proposition is all that counts.

In a recent meeting with the banking industry, Finance Minister Pranab Mukherjee has pushed for commercial banks to cut interest rates, adding that the measures announced by the central bank were not getting adequately reflected. As per a leading business daily, public sector banks have agreed to consider reducing interest rates. However, the FM declined to comment on the extent of the potential reduction in borrowing costs.