Pharma stocks have failed to impress investors this calendar year as the BSE Healthcare index underperformed benchmark BSE Sensex on a year-to-date basis.
The domestic pharma sector hogged the limelight this week following developments like USFDA approvals to Aurobindo Pharma, Glenmark Pharma and Sun Pharmaceuticals for generic versions of a blockbuster cholesterol drug in the US. Other pharma companies such as Suven Life Sciences and Wockhardt also remained in news. Suven Life on July 21 said that it has received the Establishment Inspection Report (EIR) from the USFDA for its manufacturing plant near Hyderabad. Wockhardt said the USFDA has made ‘observations’ in its EIR for the company’s three units in Maharashtra and ban on exports from the facilities to the US will continue.
So far, pharma stocks have failed to impress investors this calendar year as the BSE Healthcare index underperformed benchmark BSE Sensex on a year-to-date basis. The healthcare index slid 3.70 per cent on a year-to-date basis till July 21, whereas the BSE Sensex gained nearly 6 per cent during the same period. Pharma stocks such as Wockhardt, Ipca Labs, Cipla, Strides Shasun and Aurobindo Pharma tanked 38 per cent, 35 per cent, 21 per cent, 11 per cent and 10 per cent, respectively, between January 1 to July 21 this year.
However, market experts are bullish on the sector for the long run and believes stocks such as Dr Reddy’s Labs, Aurobindo Pharma and Lupin can give good return to investors in the next 2-3 years.
The pharma sector in India predominantly consists of generic drug makers who rely on outsourcing for a large portion of their revenues, their stock performance is largely guided by international cues, cross-currency moves, USFDA regulation etc. In the recent past, the government has also relaxed foreign direct investment norms in about eight sectors including pharmaceuticals.
Nikhil Kamath, co-founder and director, Zerodha said, “We expect the pharma sector to grow at 20 per cent on account of relaxed foreign direct investment. Investors can consider stocks such as Sun Pharma, Lupin and Dr Reddy Labs with a time horizon of 2 years.”
Among the top gainers, shares of Piramal Enterprises, Biocon, Dr Reddy’s Laboratories, Cadila Healthcare and Glaxosmithkline Pharma gained 59 per cent, 35 per cent, 16.46 per cent, 12.25 per cent and 2.66 per cent, respectively on a year-to-date basis till July 21.
Chandan Taparia, equity analyst at Anand Rathi Financial Services said, “Aurobindo Pharma, Granules India and Dr Reddy’s Labs are good buy in the present market conditions.