Pharma and IT stocks drive Sensex lower; Nifty snaps 5-week winning streak

Equity benchmarks closed mixed after a rangebound trade on Friday, due to lack of domestic as well as global cues. Investors digested macro economic data and Federal Reserve’s expected interest rate hike announced during the week.

The 30-share BSE Sensex was down 19.33 points at 31,056.40 despite positive global cues, while the 50-share NSE Nifty rose only 10 points to 9,588.05, helped by ITC.

Experts expect the market to consolidate further, especially till the implementation of much awaited goods & services tax (which is expected to be effective from July 1) and June quarter earnings that will begin next month.

After two-weeks of consolidation, Jayant Manglik of Religare Securities sees strong possibility of Nifty resuming uptrend next week. Hence traders should align their positions accordingly, he said.

Based on the findings from bottom up analysis, ICICIdirect believes the renewed strength among major underlying constituents will continue to fuel the up move in Nifty towards 10500-10700 zone over the medium term.

The support base for Nifty has shifted upwards to 8800-8900 zone, it said, adding any intermediate cool off from here on should be used as incremental buying opportunity.

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The broader markets outperformed benchmarks throughout the session, with the BSE Midcap index up 0.17 percent and Smallcap up 0.14 percent despite balanced market breadth. About 1,347 shares advanced against 1,332 declining shares on the exchange.

For the week, the Sensex was down 0.65 percent and the Nifty lost 0.8 percent.

On the global front, markets in Europe were higher as investors digested news of more money for Greece and focused on wider political events. France’s CAC, Germany’s DAX and Britain’s FTSE were up 0.3-0.7 percent at the time of writing this article. Asia also ended mostly higher, with the Japan’s Nikkei up 0.56 percent after monetary policy.

Back home, healthcare and technology stocks were under pressure whereas banking & financials gained.

The Nifty Pharma index was down nearly 2 percent after a media report indicated of likely new US order to lower drug cost in the US. Sun Pharma shed 2.8 percent and Dr Reddy’s Labs declined 0.8 percent.

The correction in Lupin (down 4.4 percent) and Cipla (down 2.2 percent) was also because of delay in approval from USFDA for Sevelamer generic. However, for the same drug, Aurobindo Pharma received FDA approval despite being one of the last filers; the stock was up 1.5 percent on top of 7 percent rally in previous session.

“Aurobindo is the first generic to receive Sevelamer generic (used by chronic kidney disease patients on dialysis) approval despite being one of the last filers. While multiple generics including Lupin, Cipla, Actavis have filed for the product they have struggled to get approval. In fact, Lupin the first filer has now guided for a late FY19 approval at best,” Jefferies said, adding Aurobindo remains its preferred pick and it remains most cautious on Lupin.

Tata Motors was biggest gainer among Sensex stocks, up 1.6 percent as PE firm Warburg Pincus will invest USD 360 million to buy stake from Tata Motors & Tata Capital in Tata Technologies.

“This implies around Rs 1,620 crore (pre-tax) should accrue to Tata Motors, enabling the parent to effectively fund half its capex requirements in FY18, without resorting to raising further debt,” Citi said while maintaining buy call on the stock.

Reliance Industries was up 0.24 percent and ended the week with 4 percent gains after RIL and BP on Thursday announced partnership to develop already-discovered deepwater gas fields.

Disclosure: Reliance Industries Ltd. is the sole beneficiary of Independent Media Trust which controls Network18 Media & Investments Ltd.
Among others, ITC gained 1.5 percent followed by HDFC Bank, HDFC, SBI and Adani Ports whereas Infosys, HUL and Wipro were down 1-2 percent.