India Markets Thursday Wrap-Up: Volatile Session Ends Lower

by: Equitymaster

Indian stock markets had a volatile session today, with the indices see-sawing on either side of the dotted line. The indices began the day on a positive note. However profit booking in index heavy weights caused the indices to move lower towards the middle of the session. Bottom fishing towards the latter half caused the indices to once again move upwards, coming off the day's lows.

However, this momentum could not be sustained in the final hour of trade, and the indices closed below the dotted line. While the BSE-Sensex closed lower by around 67 points (down 0.4%), the NSE-Nifty closed higher by around 22 points (down 0.4%). The BSE Mid cap and the BSE Small cap also did not fare any better, and lost 0.6% and 0.9% respectively. Gains were largely seen in FMCG and power stocks while such as realty and metal stocks closed lower.

As regards global markets, Asian indices closed weak today, while European indices also opened weak. The rupee was trading at Rs 49.18 to the dollar at the time of writing.

Indian pharma major Lupin stated that it has reached a patent litigation settlement agreement with US-based firms Santarus Inc and Depomed Inc involving diabetes drug Glumetza. This development could help Lupin launch its generic version of the drug by 2016. However this will be after review of various American regulatory authorities.

Earlier this year, Lupin received tentative approval for generic Glumetza from the United States Food and Drug Administration. The company believes that it is the first applicant to file an abbreviated new drug application for Glumetza 1000 mg and 500 mg strengths. Thus it is entitled to 180 days of marketing exclusivity. According to IMS Health data, Glumetza had annual US sales of around US$ 71 m for CY11 (calendar year 2011). The stock was up around 3% on the back of this positive development.

The cash strapped government may not currently have enough resources be able to recapitalize its majority owned banks. Life Insurance Corporation (LIC) has thus stepped in to buy fresh shares in state-run Allahabad Bank and Punjab National Bank (PNB). The two banks are expected to dilute 5% equity shares each to LIC to improve their tier-1 capital and create more headroom for growth. Allahabad Bank is likely to receive Rs 5 bn from the stake sale. PNB on the other hand will get over Rs 15 bn.

The Basel III, expected to be implemented from January 2013 norms, will require more capital to cover risk. These two banks will also issue preference shares to the government to raise additional capital. Allahabad bank plans to raise Rs 10 bn more from the government and PNB around 13 bn in additional funds. Other PSU banks including Bank of India and Uco Bank and Punjab and Sind Bank have also accepted proposals to place preference shares to LIC.