Bitter pharma pill for markets

Nifty50: 15,746 ▼ -78 (-0.4%)
Sensex: 52,578 ▼ -273 (-0.5%)

After a gap-up opening, selling pressure struck the market in the second half of the day. 33 of the Nifty50 stocks closed in red.

Amongst the Nifty sectoral indices, Metal (+1.4%) and PSU Bank (+0.3%) were the only gainers whereas Pharma (-4.3%) and Realty (-0.7%) were top losers. 

Here are the top stories of the day.

Dr. Reddy’s shares plunge after weak Q1

• Shares of the pharma major slumped over 10% after it reported a 1.4% YoY decline in net profit to ₹571 crore for the June quarter. Meanwhile, revenue rose 11.3% to ₹4,919 crore, but both profit and revenue numbers missed street expectations of ₹700 crore and ₹4991 crore, respectively.
• The company’s selling, general and administrative expenses increased 18% on account of marketing expenses for key brands and integration of the Wockhardt acquired portfolio. It also said that it is investigating a complaint regarding some improper payments to healthcare professionals in Ukraine and other territories. The company has also received a subpoena from the US SEC in this regard and could potentially face civil and criminal sanctions. 

Glenmark Life IPO receives strong traction

• On Day 1, the initial public offering (IPO) of Glenmark Life Sciences was oversubscribed by more than 2 times. The IPO witnessed strong participation from individual investors, with the retail portion already being subscribed more than 4 times.
• Ahead of the IPO, the company raised ₹454 crore at ₹720 per share from anchor investors yesterday. The ₹1,513 crore public issue of Glenmark Pharma’s subsidiary will be open till 29 July. You can apply for this IPO on Upstox here.

Dixon Tech profit soars but stock falls

• The contract manufacturer of consumer durables reported a 1,035% jump in net profit to ₹18 crore on the low base of Q1FY20. The company’s revenue also surged by 261% YoY to ₹1,867 crore. Despite this strong recovery, it reportedly missed the street’s expectations. Further, compared to the March quarter, the revenues and profits have declined 11% and 59%, respectively. 
• The company highlighted that it saw resilient demand for LED TVs in Q1. For the lighting vertical, it stands in an advantageous position due to its healthy inventory of semiconductor chips, which are facing a global shortage. Meanwhile, shares of the company were down 0.5% today in line with the weakness in the broader market.

Closing bell

While it may seem that Dr. Reddy Lab’s results spooked the markets, the selling pressure was also seen in other pockets such as private banks and Reliance Industries. Further, the sharp fall in Chinese and Hong Kong equity markets acted as a sentiment spoiler. China has recently initiated regulatory crackdown on the tech sector, this has led to selloff in tech stocks in the region. Meanwhile, the volatility index India VIX has risen close to 13% so far this week and points to higher volatility ahead. On a broader basis, Indian markets continue to be in the range of 15,450–15,950, And a decisive break of this range can provide directional cues. 

Good to know

What is support?
A support refers to a price level of a stock from which it is expected to bounce up. Buying interest at support is high because it could either be a previous point of reversal or some technical level or simply a price where most people believe the stock is a value buy. Thus, at support generally the bulls overpower the bears.

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Investment in securities markets is subject to market risks; please read all the related documents carefully before investing. The securities quoted are exemplary and are not recommendatory. Past performance is not indicative of future results. Details provided in the above newsletter are for educational purposes and should not be construed as investment advice by RKSV group. Investors should consult their investment advisor before making any investment decision.