Asian stock markets are lower today as Japanese and Hong Kong shares fall on concerns about the US administration's protectionist stance cast a shadow on financial markets. The Nikkei 225 is off 0.99% while the Hang Seng is down 0.31%. The Shanghai Composite is trading down by 0.14%. US stocks closed mixed in previous trading session.
Meanwhile, Indian share markets have opened the day on a negative note. BSE-Sensex is trading lower by 45 points and NSE-Nifty is trading lower by 13 points. S&P BSE Mid Cap is trading up by 0.1% and S&P BSE Small Cap is trading down by 0.1%.
Losses are largely seen in software stocks and realty stocks. Metal stocks and capital goods stocks witness majority of the buying momentum. The rupee is trading at Rs 63.64 against the US$.
The Market cap to GDP ratio for Indian companies is close to dangerously high levels. While this is still some way off the peak of FY-08, when it had once reached close to 150, it's relatively high.
FY17 saw this ratio reach close to 80. It is also expected to increase further given the moderate growth expectations in India's GDP for FY18. Warren Buffett once considered this as one of the best valuation metrics to gauge the markets.
The Warren Buffett Indicator Suggests Indian Equity Market Is Overvalued
Past history shows some correlation between the ratio and the share market. 2008 saw Sensex decline by 38%, when this ratio crossed the 100 mark. Also, the market has bounced back sharply when this ratio was low.
The basic assumption in this ratio is that whenever the GDP of the country grows, the market performance will reflect it. Also, when stocks do well, it can be extrapolated to assume the Indian economy is doing well.
Indigo share price surged 2% in morning trade after the company reported a profit of Rs 7.62 billion in the quarter ended December 31, 2017, up 56.4% compared to Rs 4.87 billion in same period in last financial year.
The company's net profit was boosted by foreign exchange gains and credits from Pratt & Whitney to compensate for glitches in engines that grounded the airline's Airbus planes.
In Q3, IndiGo's revenue from operations rose 24% to Rs 61.77 billion from Rs 49.86 billion in the same period last year. Fuel costs, which account for 30-40% of the company's total expenditure, jumped 20.6% as the airline added flights and crude oil prices surged.
Separately, the aviation ministry announced that IndiGo and Jet Airways (India) Ltd have won rights to fly 20 and four regional routes under the UDAN regional connectivity scheme, respectively.
Meanwhile, according to company's president, Indigo remained interested in acquiring the international operations of Air India. The company will irrespective explore the long-haul opportunity with or without AI.
Moving on to news from pharma sector. Biocon share price plunged 4% in morning trade after the company's consolidated net profit declined 46% to Rs 919 million in the quarter ended December 2017 as interest and depreciation costs relating to its Malaysia facility rose.
The company's net sales rose 1.3% to Rs1,057.9 crore during the quarter from a year earlier.
As per an article in The Livemint, Biocon's branded formulations business, which includes sales in India and the UAE, reported revenue of Rs 1.56 billion, an increase of 27% from a year earlier, while research services business, registered a growth of 17% to Rs 3.87 billion.
Revenue of Biocon's small molecules business fell 9% from a year ago to Rs 3.69 billion. This business continues to face headwinds arising from pricing pressures and channel consolidation in the US but continued demand for immunosuppressants offset some of the pressure.
In another development, even as pharma companies reel under the regulatory crackdown in the largest export market in the US, there has been no succor from the domestic markets. The growth in the Indian pharmaceutical market almost halved to 5.5% in 2017. Only 3,932 brands were launched in 2017. This is the lowest since 2013.
However, with the government bringing a number of essential drugs under price control, prescription drugs are witnessing sluggish growth. Therefore, pharma companies are now focusing on the over-the-counter (OTC) medicines.
Recently, Lupin forayed into the OTC segment after it re-launched Softovac, its more than three-decades-old brand. Torrent Pharma has acquired Unichem Lab's domestic business which has popular OTC brands such as Unienzyme. The consumer products arm of Piramal Enterprises acquired four OTC brands from Pfizer last year; and recently, it acquired a gastro-intestinal brand, Digeplex, from Shreya Lifesciences.
Thus, while pricing controls keep the operating environment tough in the domestic market, pharma companies with strong brands in the OTC category are better placed to ride the slowdown.
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