Heard on the Street, 5 Mar, 2008

Ranbaxy bucks trend on bonus talk

Shares of Ranbaxy Laboratories have been steadily rising over the past one month, defying the overall sluggish trend in the sector. The stock ended at Rs 450 on Tuesday, marginally below the previous day’s close, and up around 20% month-on-month. So what is driving buyers to the counter.

One of the many talks doing the rounds is that the company may shortly announce a bonus issue. In response to a query from ET, a Ranbaxy spokesperson said the company did not comment on market speculation. Analysts tracking the stock expect the company to reap a windfall from patent challenges in the US in the next three years.

The Delhi-based drug maker entered into litigation settlements for three products with GlaxoSmithKline, Boehringer Ingelheim and Astellas Pharma. These products have a combined market size of around $4.5 billion. Ranbaxy has 18 more Para IV with first-to-file status in the pipeline.

These products have a market size of about $27 billion at innovator’s price. The latest Budget has also been positive for Ranbaxy. While the excise duty cut to 8% may have little impact, as the company already runs manufacturing units in tax-free zone, the increase of the scope of R&D incentives will help cut research costs.

After losses aplenty, it’s time for some derivatives gains

After suffering bruising losses in the crash of January, derivative traders seem to be slowly trudging back, confident that they have found the right formula for safe gains. Open interest in Nifty March futures have seen a build up of more than 4 crore shares over the past four sessions, an indication that retail traders could be back in action.

With the decoupling theory now having made way for the ‘recoupling’ theory, these traders feel they cannot go wrong if they short sell Nifty futures a day after a decline in the US market. It now appears that too many traders are following this formula, creating an excess of short positions in the market.

The bull cartel is said to be lying in wait for a suitable opportunity to launch a surprise attack on their rivals. They did make an attempt on Tuesday, though it turned out to be an unsuccessful one. The medium-term outlook on the market remains cautious, but there is likely to be some wild fluctuations in the near term as bulls and bears slug it out.

VIA:E.T