India Markets Monday Wrap-Up: Volatility Plagues the Indices

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 |  Includes: DSKYY, EPI, IFN, IIF, INDY, INR, PFE, PIN, RBXLF, SCIN
by: Equitymaster

Indian markets had a rather volatile session today as they oscillated to either side of Friday's close. Any foray above the dotted line proved futile as renewed profit booking at higher levels took a toll. While the BSE Sensex closed lower by around 27 points, the NSE Nifty lost around 7 points. Midcap and smallcap stocks managed to buck the trend as both the BSE Midcap and BSE Smallcap closed higher, albeit with miniscule gains. While banking and metals stocks found favour, FMCG stocks were at the receiving end.

As regards global markets, Asian indices closed in the red today while most European indices have opened in the green. The rupee was trading at Rs 47.10 to the dollar at the time of writing.

Pharma stocks closed mixed today. While Ranbaxy (OTC:RBXLF) and Biocon found favour, Sun Pharma and Cipla closed in the red. As per a leading business daily, a US district court has denied Sun Pharma's motion to reverse an earlier jury verdict that had declared the patent on 'Protonix' valid. The original patent on 'Protonix' is held by the Swiss company Nycomed. The latter had licensed the drug to Wyeth which is now part of Pfizer (NYSE:PFE). It must be noted that Sun Pharma had launched the generic version of 'Protonix' in the US market in FY08 and reaped substantial revenues and profits in that year. The launch was an 'at-risk' launch. Earlier this year, the US courts declared the patent on the drug to be valid. This means that Sun Pharma will most likely have to dole out damages, the extent of which has not been divulged.

Private banking stocks closed mixed today. While HDFC Bank and Yes Bank closed firm, ICICI Bank was out of favour. As per a leading business daily, ICICI Bank expects lending rates to go up after September as it expects credit offtake to pick up in the second half of FY11. This is on the back of increased economic activity. The bank believes that the demand for liquidity will increase substantially in the second half and so interest rates on the lending side are expected to see a rise. As far as inflation is concerned, rise in prices had been observed not only in case of food items but for non food items as well. As production capacity gets created in India, supply would also increase and this would tame inflation going forward.

The SEBI panel has recommended an increase in the acquisition threshold for the initial trigger of an open offer from the current level of 15% to 25% of the voting capital of a listed company. Not just that, once a buyer buys 25% of a listed Indian company, it should make an offer to buy out the remaining 75% stake instead of the current 20%. Investors would do well to recall the Daiichi-Ranbaxy deal wherein Daiichi (OTC:DSKYY) acquired a majority stake in the company. The deal became infamous in that while the Ranbaxy promoters could convert all their shares at a huge premium, only 20% of the shareholders benefitted from this premium. This and several other instances have thus prompted the SEBI panel to put forth this proposal. This move is part of SEBI's agenda to come out with reforms in the interest of minority shareholders.