13th June, 2013 : Comments by Amar Ambani, Head of Research, India Infoline (a well diversified financial services company)
“Sun Pharma settled an ongoing litigation regarding generic pantoprazole pending in the U.S. District Court with lump-sum payment of US$550mn. The settlement is much higher than the provision of US$108mn done by Sun Pharma. Currently the company has ~US$1.3bn cash at group level and now with the reduced cash balance, we expect lower other income in FY14. We expect some correction and suggest accumulation at lower level,” says Amar Ambani, Head of Research IIFL.
It was the sixth straight session of losses for the Indian equity market on Thursday. The Sensex has closed below the psychological 19,000, a three-month low.
The weakness was broad-based with prolonged selling pressure in scrips across the board following a sell-off in US and the Asian markets. The Japanese Nikkei tumbled 6.4%, hitting its lowest close since April 3.
Even Fitch’s outlook change on India, which released after market hours on Wednesday, was unable to bring cheer to investors in India. The rating agency revised India’s sovereign credit outlook to stable from negative and affirmed the BBB- rating assigned earlier.
The Finance Minister’s statement on the Indian currency was unable to bring in a wave of cheer. To soothe importer and market concerns, Chidambaram said, “There is no reason to panic over the rupee’s movement. It will not continue to fall versus the dollar.”
To add insult to injury, the government decided to tweak twice the industrial production data. The April IIP data, which declared as 2% on Wednesday, was revised to 2.2% and then 2.3%.
With the government failing to keep its house in order, foreign institutional investors have decided to take money off the table on account of the high current account deficit and fast-depreciating rupee. FIIs have been net sellers to the tune of Rs. 204cr in the last four trading sessions.
The Sensex closed down 213 points at 18,827 while the Nifty ended at 5,699, down 61 points over Wednesday’s close.
IIFL expects the Nifty to find support at 5,605 levels, which also acted as key support in the April decline