Indian Markets Rise For 5th Consecutive Session
The indices ended higher for the fifth consecutive session on Monday, usually a sign that the markets might pause to take in some air. December quarter earnings are now over and the focus is back on macroeconomic news.
Our Top Reports For Today
- (00:00) Stories Of The Day
- (01:00) Indian markets rise for 5th consecutive session, could pause for breath.
- (01:45) Magnificent Seven tech stocks to power S&P 500 profits in 2024, says Goldman
- (03:18) It’s 50 years of Bombay High, India’s biggest crude producing field.
- (05:47) Why Global Pharma MNCs are exiting India.
- (20:13) Dubai airport traffic crosses pre-pandemic levels, maximum passengers to India.
NOTE: This transcript contains only the host's monologue and does not include any interviews or discussions that might be within the podcast. Please refer to the episode audio if you wish to quote the people interviewed. Email [email protected] for any queries.
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Indian Markets Rise For 5th Session
Equity markets were strong again and close to record highs after the Nifty 50 touched a new high of 22,187 on Monday’s trade, closing finally 82 points higher at 22,122 while the BSE Sensex rose 282 points to close at 72,708.
The indices ended higher for the fifth consecutive session on Monday, usually a sign that the markets might pause to take in some air.
December quarter earnings are now over and the focus is back on macroeconomic news, including of course interest rates in the United States which are not going down anytime soon.
Goldman Revises S&P Growth On AI Booster
Meanwhile, on Wall Street, Goldman Sachs raised its year-end target for the benchmark S&P 500 to 5,200, a 4% increase from current levels, citing an improved earnings outlook for the index companies, Reuters reported.
Earlier, Goldman had said the index would end 2024 at 5,100, before raising the forecast from 4,700 in December, on cooling inflation and expectations of the U.S. central bank easing rates in the year.
The Tech play is quite strong as Goldman analysts are saying that the earnings strength of mega-cap stocks, especially those in the Magnificent 7 tech stocks that include Meta, Google, Amazon and Nvidia, would boost aggregate S&P 500 profits in 2024.
“The growth in artificial intelligence and consumer strength is expected to propel revenue growth alongside margin expansion, Goldman analysts said, forecasting an overall 8% profit increase for S&P 500 companies this year, fuelled by an improved U.S. economic outlook and stronger mega-cap profit margins.
If this translates into a strong stock market, obviously other markets will benefit as well though other analysts, as we discussed yesterday, are sounding the early alarm bells on high valuations.
Its 50 Years Of Bombay High
First a look at oil markets right now.
Oil fell from the highest level in three weeks as lingering concerns over the demand outlook offsetting ongoing Middle East tensions.
Brent crude was below $83 a barrel after rising around 8% over the past two weeks.
Now the interesting oil story is this one.
Bombay High, or now Mumbai High produces about 70% of India’s crude oil and gas requirements. Though India, to put things in context, imports over 85% of its crude oil.
But the story goes back to 1974, a time the world was reeling with an oil crisis.
The Oil and Natural Gas Commission set up in 1955 to join companies like Oil India Limited to hunt for oil had launched its offshore exploration effort about 90 nautical miles or 16o km off Mumbai.
The first foray into the seas to drill oil was a Japan-built drill ship called Sagar Samrat or the emperor of the seas.
The ship began drilling on this day and the story is obviously this.
It’s 50 years of Bombay or Mumbai High.
Most of the oil fields in that region have gone out of production and overall production in the fields has now peaked.
The Mumbai High field (previously Bombay High field) was discovered in February 1974 by a Russian and Indian team from the seismic exploration vessel Academic Arkhangelsky while mapping the Gulf of Cambay.
Full production started in May 1976 and a subsea pipeline was laid in 1978 to take the oil from the field to refineries in Mumbai. Until then, oil was shipped in tankers.
Presently, the reserves at Mumbai High can produce for some more years, the plan is to invest in redevelopment.
ONGC chairman and CEO Arun Kumar Singh said that they were committed to intensified production plans and significant investments for exploration, expressing hope for discovering a new field akin to Mumbai High soon, even as he reiterated ONGC's commitment to exhaustively explore every opportunity within Mumbai High until every last drop of oil is recovered.
Why Pharma MNCs Are Exiting India
It's actually an interesting contradiction when you look at it. India is the most populated country in the world, more Indians are susceptible to non communicable diseases than ever before, spend on healthcare, including hospitals and medicines is rising and yet, some of the biggest global names in pharmaceuticals, from Novartis to Sanofi, among others are either getting out or shrinking their presence.
Actually, this did not happen overnight though the latest to announce a strategic look or relook at its business is Novartis.
Novartis India in an exchange filing said the Board took note of the communication received from Novartis AG, its promoter saying it was conducting a strategic review to unlock value of their shareholding in the company. Novartis AG held a 70.68 per cent stake in Novartis India.
Doctor Reddy’s is already rumoured to be interested in the business and its stock price hit a 52-week-high on Monday.
Why is this happening?
The reason principally is that most pharma MNCs do not have drugs that they can effectively compete with Indian pharma companies who have become larger over the years and more so in recent years.
As drugs go off-patent, Indian companies have jumped in and started producing more economically and at scale.
Selling drugs also involves field forces and adhering to - for the pharma MNCs - global standards which they find difficult, including at the manufacturing stage.
So while the market itself is growing, their share of healthcare spend has been falling.
Novartis has a diabetes drug Galvus which is marketed and distributed by Cipla went off patent in December 2019 which means that other manufacturers could start making it. Which they did, over 15 of them, resulting in prices falling by 70% or so then.
Galvus is the brand name but the drug is Vildagliptin.
The brand still has life though. Last year Novartis signed a deal with Cipla which allowed Cipla to take over manufacturing and marketing in a perpetual agreement from January 2026.
In February 2022, Novartis entered into a sales and distribution agreement with Dr Reddy’s Laboratories to promote and distribute Voveran, Calcium and Methergine in India.
The move also saw some 400 jobs being lost in Novartis.
A few weeks later, Novartis sold its cardiovascular brand Cadmus to Dr Reddy’s Laboratories (DRL) and then sale of another cardiac trademark, Azmarda, to JB Chemicals. A year later, Novartis sold 15 ophthalmology brands to JB Chemicals for close to ₹1,000 crore.
Sheetal Sample of Pharmatrac tells me that MNCs are usually sticking to core super speciality businesses and exiting from many others as in the case of Novartis or for that matter Sanofi which has sold Soframycin.
The interesting thing, to the point of opportunity, she says is that Indian Pharma MNCs barely contribute 1% of the global turnover of major pharmaceutical companies.
Glivec, the anti cancer drug is another example. India’s Supreme Court dismissed Novartis AG's attempt to win patent protection for Glivec, setting a benchmark for intellectual property cases in India.
And this happened in 2013, if you are trying to understand the history of why pharma MNCs have found the going tough.
Sanofi is another example. In 2021 it sold its nutraceuticals business to Universal Nutriscience, an Indian company.
The same year it sold a more than 50-year-old brand Soframycin, a name that may be familiar to you to a company called Encube Ethicals which had been contract manufacturing Soframycin skin cream for over 20 years.
GSK is an exception of sorts, its brands Betnovate and Augmentin do well but are under price control but the company has been shrinking in staff across departments and it has sold a manufacturing unit in 2021.
There are other examples as well but the larger point is that the Indian pharmaceutical market is not what it might seem, at least for overseas drug giants.
I reached out to Murali Neelakantan, a keen observer of the pharmaceutical industry and also earlier Cipla’s first Global General Counsel and also later a director and Global General Counsel at Glenmark in 2017-18. I began by asking him why pharma MNCs were exiting India.
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Dubai Airport Pulls Max Passengers From India
If you want to understand why the Indian government is not giving more seats to airlines like Emirates it is this.
Dubai is pulling more and more passengers from India, even as it crossed its pre-pandemic peak.
Dubai International Airport (DXB), the world's busiest international hub, registered a 31.7% increase in passenger traffic last year to 86.9 million, surpassing pre-pandemic levels, Reuters reported.
That compares with 86.4 million passengers flying through the airport in 2019, before COVID-19 grounded the global aviation industry.
DXB is connected to 262 destinations across 104 countries through 102 international carriers, the airline said.
Dubai is the biggest tourism and trade hub in the Middle East.
India was DXB's top destination country in terms of traffic with 11.9 million passengers last year, followed by Saudi Arabia with 6.7 million, Britain with 5.9 million and Pakistan with 4.2 million.
Dubai Airports said it forecast DXB would receive 88.8 million passengers in 2024, putting the hub within close proximity to its record high of 89.1 million set in 2018.
