After opening the trading day in the red, share markets in India continue to trade below the dotted line in the morning trade amid weak Asian markets. Realty sector and capital goods sector are trading on a positive note, with stocks in the metal sector and stocks in the oil & gas sector witnessing maximum selling activity.
The BSE Sensex is down by 75 points and the NSE Nifty is trading down by 31 points. Meanwhile, the BSE Mid Cap index is trading up by 0.2%, while the BSE Small Cap index is trading up by 0.5%. The rupee is trading at 64.73 to the US$.
Small caps have comfortably outperformed the Large caps and how. The BSE Small Cap Index has returned 21.7% in FY18 compared to 12.5% by BSE 100 and 11.7% by the Sensex.
Small Caps - Outperformers in Current Financial Year
Expectedly, valuations of certain Small cap companies have gone through the roof. It is important to understand the highly volatile nature of these stocks. In a downturn, these stocks tend to move in the opposite direction much faster as well.
While there, undoubtedly, lies hidden opportunities in the small cap space, it is important to focus on fundamentals of these stocks. Next, assess if they have the potential to move on to the 'Safe stock' category in the future.
In news from pharma sector, as per an article in The Hindu Business Line, Aurobindo Pharma is looking at inorganic growth opportunities in Eastern Europe and other geographies for deeper market penetration and to secure newer technologies.
Apart from acquisitions, the company is also keen to expand its product portfolio in the US and Western European markets with high-value drugs. The high-value products that are in the pipeline include oncology, hormones, depot injections, peptides, inhalers, patches and films, vaccines and biosimilars.
Also as per the reports, the company expects its US injectables business to grow at least 40% this financial year thanks to new launches and higher sales from existing products-growth that is likely to help offset some of the pricing pressure in oral solid drugs.
As per an article in The Livemint, the company's injectables business has been growing significantly over the last two-three years. In fiscal year 2016-17, US injectable sales rose 67% to US$157 million, while in 2015-16, sales were up 39% year-on-year at US$95.2 million.
The company's managing director recently stated that there was no pressure to do an acquisition to fill any gap. He also stated that the pharma sector does not have enough opportunities to grow organically.
Earlier this year, the company announced acquisition of Portugal's Generis Farmaceutica SA from Magnum Capital Partners for a consideration of €135 million.
At the time of writing, Aurobindo pharma share price was trading up by 0.6% on the BSE.
Moving on to news from oil & gas sector. As per a leading financial daily, ONGC has sought more than doubling of natural gas prices to help bring significant discoveries in KG basin and Gulf of Kutch to production.
As per the reports, gas discoveries in shallow sea off Andhra Pradesh on the east, and off Gujarat on the west are economically unviable to produce at the current government-mandated price of US$ 2.89 per million British thermal unit. But, the company wants a price of over US$ 6 per mmBtu to help it produce the gas without suffering any losses. In the absence of a viable gas price, it will have to mothball the US$ 1.5-billion projects.
While the KG block will produce a peak output of 5.35 million standard cubic meters per day, the same from Gulf of Kutch block will be around 3 mmscmd. It would take a minimum three years to bring the gas finds to production. The combined output is about 14% of the ONGC's current output of 60 mmscmd.
Meanwhile, the company's overseas subsidiary ONGC Videsh Ltd (OVL) reported a 15% rise in its half yearly net profit on the back of higher oil and gas production. Consolidated net profit at Rs 2.8 billion in April-September was higher than Rs 2.43 billion net profit in the same period of the previous fiscal.
The production in first half of the fiscal was higher mainly due to acquisition of additional 11% stake in Vankorneft project in Russia in October 2016.
ONGC share price is trading on an encouraging note (up 1.1%).
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