After opening the day in red share markets in India witnessed choppy trading activity and are presently trading well below the dotted line. Sectoral indices are trading on a mixed note, with stocks in the realty sector and stocks in the metal sector witnessing maximum buying interest. While stocks in the banking sector are leading the losses.

The BSE Sensex is trading down by 435 points (down 1.3%) and the NSE Nifty is trading down by 131 points (down 1.2%). Meanwhile, the BSE Mid Cap index is trading down by 0.2%, while the BSE Small Cap index is trading down by 0.1%. The rupee is trading at 64.29 to the US$.

In news from stocks in the pharma sector. Jubilant Lifesciences share price is among the most active stocks today after the company said its subsidiary has received final approval from the US Food and Drug Administration (USFDA) Amantadine Hydrochloride tablets, an anti-viral and anti-Parkinsons drug.

The approved drug, generic version of Symmetrel of Endo, is indicated for the prophylaxis and treatment of signs and symptoms of infection caused by various strains of influenza A virus. It is also indicated in the treatment of Parkinsonism and drug-induced extrapyramidal reactions.

As on December 31, 2017, Jubilant Life Sciences had 86 ANDAs for oral solids filed in the US, of which 56 have been approved and 12 injectable filings, of which 10 had been approved, the filing added.

Jubilant Lifesciences share price was trading down by 2.5%.

The Indian pharmaceutical industry has come under a lot of regulatory pressure in the past few years.

The sector has faced great volatility over the years.

We had written about the current predicament of Indian pharma companies in one of the premium editions of the 5 Minute WrapUp:

• Over the past few years, risk in the US markets has increased. The US Food and Drug Administration has become stricter on products entering US borders. Surprise inspections have increased and companies are being issued warning letters. This has impacted the business and earnings of Indian pharma players, causing major volatility for the sector.

Is the Worst Over for all the Pharma Stocks?

The list of pharma sector woes is long. So, is there light at the end of the tunnel? Girish Shetty, Research Analyst thinks there is.

As per him, it doesn't make sense to paint all pharma stocks with the same brush. The leaders of the industry will certainly survive this phase. There are interesting, niche pharma stocks that are worth your attention.

Facing pricing pressures in the domestic and export markets, currency fluctuations, as well as manufacturing issues related to their plant, there is a transformation happening in the overall sector as to how business is done and will be done in the future.

Moving on to news from stocks in the banking sector According to a recent report by ratings agency India Ratings and Research, public sector banks (PSBs) may need capital of over Rs 2 trillion for a credit growth of the 8-9% in FY19.

In October last year, the government had announced a Rs 2.11 trillion bank recapitalization plan spread over two fiscals, 2017-18 and 2018-19. Out of this, the government last month said it would infuse Rs 881 billion capital in 20 public sector banks (PSBs) before March 31, 2018.

The report said that the recapitalization amount from the government will go towards sustaining the banks. For a higher growth state-run banks may need more capital. It estimates state-run banks' capital requirement of Rs 2.06 trillion at a modest credit expansion of 8-9% in FY19.

It said the profit and loss account for most state-run banks would also be under pressure due to accelerated provisioning requirement on the cases identified by the regulator to be referred to the National Company Law Tribunal under the Insolvency and Bankruptcy Code in FY18.

PSBs are burdened by bad loans that have doubled in the past five years. This has led to a slowdown in the loan growth segment. Due to this, PSBs lost their market share from 70.9% in FY16 to 64% in FY17.

PSBs are in a big mess. They already have a huge amount of bad loans piled up. There is a sense of urgency towards the recapitalization move. This is because banks have to be recapitalized by 2019 to be compliant with the Basel-III frameworks.

As per SBI Ecoflash report, subscribing to the recapitalization bonds does not really strain bank finances, because lending to the centre is the safest thing.

The report also highlights the advantages of such bonds because these do not alter the fiscal math; the government earns both dividends and market returns on bank shares. Moreover, the government need not raise immediate tax revenues. And by borrowing directly from the banking system instead of the markets, the centre can avoid crowding out private borrowings or distorting market yields.

However, using recapitalization bonds can only act as a short-term measure to the crisis afflicting Indian public sector banks today. Such a measure will not address the structural issue in the banking system, i.e. the poor standard of lending and poor governance system.

Our big picture editor, Vivek Kaul, talks about moral hazard risk arising out of recapitalization. He writes:

• "If the government bails them around this time around, the banks know that they can count on the government bailing them out the next time around as well. And this means that they can follow fairly loose standards of lending, in order to lend money quickly."

My colleague, Ankit Shah, editor of Equitymaster Insider presents an interesting analysis of recapitalization plan.

Here's a snippet of what he wrote:

• "The Indian stock markets are at an all-time high. The BSE Sensex has crossed the 33,000 mark.
  
  Stock prices of public sector banks are up anywhere between 10% and 40%.
  
  I did some quick math and found that the 21 listed public sector banks have gained approximately Rs 1.1 trillion of market capitalization in just one day.
  
  In other words, 50% of the recapitalization amount of Rs 2.11 trillion has been captured by the stock market in a single trading session".

Ankit is deeply intrigued by the interplay of politics and economics, and how it impacts the stock markets. His aim is to connect the dots and offer deeper insights into the workings of the market.