With the rupee ruling firm against the greenback and the political pundits foreseeing a stable government at the centre leading to increased investment, the focus of the investors appears to be moving away from IT and pharma stocks to the beaten down banking, auto and capital goods counters.

What has added to the nervousness of the investors is the fact that Sun Pharma, one of the most favoured stocks in the pharma space, has come under the US FDA scanner with its Kharkhadi factory in Gujarat getting import alert from the US drug regulator. The reported observation of the Infosys CEO that the revenue growth in the 2014 fiscal would be at the lower end of the projected band saw the stock being whipped on the NSE and emerging as the biggest Nifty loser.

On the NSE, the major Nifty gainers were oil and gas stocks, banking and automobile stocks while pharma and IT stocks were seen losing momentum.

The one exception in the pharma space was Dr Reddy’s which was up sharply. BPCL gained ₹26.30 to move up to ₹439.20. The stock hit a fresh 52-week high of ₹441.30 today and has had a phenomenal run this year after falling to a yearly low of ₹255.95. Dr Reddy’s broke from the pharma pack to make a solid gain of ₹61.65 to trade at ₹2,749.15.

Another stock to hit a new yearly high was HDFC Bank which touched ₹744 before easing to ₹740.20, a gain of Rs 14.65. Kotak Mahindra Bank, which was up by ₹21.80 to ₹766.65, SBI which was up by ₹ 38.30 to ₹1683.40, Reliance that gained ₹14.60 to ₹ 885.95, Axis Bank that gained ₹22.40 to ₹1420.30 and ICICI Bank up by ₹18.95 to ₹1230.60 were among the other major gainers.

Auto stocks rev up

The auto industry provided its fair share of gainers. M&M shot up by ₹22.70 to go past the psychologically important ₹1,000 mark to ₹1,013.95, Hero MotoCorp was up by ₹33.40 to ₹2,095 and Bajaj Auto was trading at ₹1,982.20, a gain of ₹23.20. ACC was trading at ₹1,256.20, a gain of ₹24.65 and L&T was up by ₹14.60 to ₹1,232.85.

Strong rupee hits IT, pharma stocks

Surprisingly, the IT and pharma stocks were in reverse gear probably because the strong rupee ruled out possibilities of further gains due to a weak currency in the near term, in addition to the Sun Pharma development.

Infosys was the biggest Nifty loser in terms of value and percentage after it emerged that its CEO SD Shibulal, at an investor meet, had stated that the revenue growth for the company during the 2014 fiscal would be at the lower end of the 9-10 per cent guidance that the company had offered. The stock dived by 7.42 per cent or ₹ 272.45 to ₹3398.85.

This development, however, did not have any impact on other frontline IT stocks. TCS was up by ₹ 17.60 to trade at ₹ 2197.05 and HCL Tech gained ₹13.35 to trade at ₹1473.60 and Wipro was up by ₹6.30 to ₹573.05

Sun Pharma shed about 4 per cent, losing ₹24.35 to trade at ₹579.95 after the import alert it received from US FDA for its Gujarat plant. Lupin was down by ₹7.15 to ₹953.90 and Ranbaxy lost ₹ 4.55 to trade at ₹358.50.

However, Sarabjit Kour Nangra, VP - Research - Pharma, Angel Broking, Mumbai, felt that the action by US FDA "will not have major impact financially", since the plant’s share of overall company revenue was not significant. Sun Pharma has 12 USFDA facilities with 6 in the US, 3 in India and one each in Canada, Israel and Hungary. Hence, Sun Pharma was capable of meeting the US market demand from other facilities. Besides, Sun Pharma had successfully resolved such issues in the past and she maintained "neutral rating on the stock, owing to the valuations".

(This article was published on March 13, 2014)
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