Dr Reddy’s Labs shines despite downcast markets

Our Bureaus

Mumbai, Sept 12: Domestic markets stayed jittery and the bourses lost heavily in the wake of huge selling by different sets of investors on Wednesday, the day after the terrorist attack on the US.

New economy and pharma sector stocks were hammered down in the morning session but large scale institutional buying particularly from domestic financial institutions and public sector mutual funds helped pharma stocks recover their earlier losses. Among the frontline pharma stocks, Dr Reddy’s Labs (DRL) was the star performer with the counter clocking unusual trading volumes.

According to brokers, investors were of the opinion that with the development in the US, export revenues in both the new economy and pharma sectors will be severely hit in the short term. However, post mid-session it seemed that their worries were unfounded as far as the pharma sector was concerned.

Said an analyst: “I can’t imagine any reason why DRL should be affected by Tuesday’s tragedy in the US.” Exports of generics to the US is expected to be a significant growth driver over the next few years.

Adds Sun Pharma managing director Dilip Sanghvi: “The human cost is heavy and the fallout on the world economy of a tremendous magnitude, too large to assess. As far as the pharma industry is concerned, the US already accounts for about 50 per cent of the world market, and it would be difficult to guesstimate the fallout at this point in time. Companies would certainly feel a currency-related and fuel price related impact, which would cut across industry. It is difficult to see a direct impact otherwise”.

The prices of major pharma stocks recovered smartly from the day’s lower levels and some of them ended in positive territory. DRL was one of the major gainers with the counter clocking almost double the volume than the usual. At The Stock Exchange, Mumbai (BSE), the DRL stock saw trading volume of 6.55 lakh shares valued at Rs 118.02 crore. The stock price, which went down by 7.3 per cent compared to Tuesday’s close of Rs 1,848, to a low of Rs 1,713, recovered smartly to close at Rs 1,874.80. In fact, the stock actually gained by 1.42 per cent.

Analysts attributed the unprecedented volumes at the DRL counter to four major movements where short-term players got out and then re-entered realising that there has been a fair amount of institutional buying.

The DRL stock, which began trading on the New York Stock Exchange (NYSE) on April 11, 2001, after completing a $132.78 million American Depositary Shares (ADS) offering, has seen significant interest at its counter on the domestic bourses too.