Pharma stocks in demand as market looks for safety
, ET Bureau|
Updated: Sep 22, 2017, 12.21 PM IST
Pharmaceutical companies are back in vogue on the bourses as investors look to defensive sectors in a market trading at record high levels. Shares of various pharma companies, such as RPG Life Science, IPCA Lab, Dr Reddy's and Wockhardt, have gained between 20 per cent and 50 per cent in the past month.According to analysts, Sun Pharma and Cipla are top bets in the sector.
On Thursday , pharma stocks including Ipca Lab, Dr Reddy's, Torrent Pharma, FDC and Divi's Lab gained between 5 per cent and 16 per cent. BSE's healthcare index rose 2.7 per cent, while the Sensex ended almost flat.
"We believe the current base reset lends itself to the creation of an environment conducive to bottom-up stock picking," said Anmol Ganjoo, analyst, JM Financials.
Analysts now find the risk-reward attractive for large-cap quality pharma stocks.
"From a stock price standpoint, we now find Sun Pharma attractive, besides our old favourite defensive bet, Cipla, among large caps. Also, Torrent Pharma, Alembic and Strides offer interesting entry points at current valuations," said Ganjoo.
In the past few days, several fund managers have started accumulating pharma stocks. Analysts have upgraded their ratings in several stocks, such as Divi's Lab, Dr Reddy's Lab, Sun Pharma, Ajanta Pharma and Torrent Pharma in the past month.
"The market has scaled to a new high without any strong earnings growth visibility. Under such circumstances, investors are looking at pharma stocks as a safe haven," said Ajaj Bodke, CEO, Prabhudas Lilladher.
Large pharma companies remained under pressure in the past three years due to regulatory uncertainties, the burden of sustaining historical growth rates on large bases and a stronger rupee among other factors. BSE's healthcare index rose at 35 per cent per annum on a compounded basis between March 2009 and March 2015.Since then, it has fallen nearly 15 per cent in absolute terms till August 2017.Sensex gained 15 per cent during January 2015 to August 2017.
"For the past couple of days, pharmaceutical counters like Sun Phar ma, Dr Reddy, Wockhard Pharma, Aurobindo Pharma and Lupin have rallied due to a good amount of long formation," said Sneha Seth, derivative analyst, Angel Broking. "Looking at the open-interest activity , we believe this space has further upside potential."
Early this week, Credit Suisse ungraded the rating of India's largest pharma company, Sun Pharma, to outperform from neutral with a target price of Rs 595.
On Thursday , pharma stocks including Ipca Lab, Dr Reddy's, Torrent Pharma, FDC and Divi's Lab gained between 5 per cent and 16 per cent. BSE's healthcare index rose 2.7 per cent, while the Sensex ended almost flat.
"We believe the current base reset lends itself to the creation of an environment conducive to bottom-up stock picking," said Anmol Ganjoo, analyst, JM Financials.
Analysts now find the risk-reward attractive for large-cap quality pharma stocks.
"From a stock price standpoint, we now find Sun Pharma attractive, besides our old favourite defensive bet, Cipla, among large caps. Also, Torrent Pharma, Alembic and Strides offer interesting entry points at current valuations," said Ganjoo.
In the past few days, several fund managers have started accumulating pharma stocks. Analysts have upgraded their ratings in several stocks, such as Divi's Lab, Dr Reddy's Lab, Sun Pharma, Ajanta Pharma and Torrent Pharma in the past month.
"The market has scaled to a new high without any strong earnings growth visibility. Under such circumstances, investors are looking at pharma stocks as a safe haven," said Ajaj Bodke, CEO, Prabhudas Lilladher.
Large pharma companies remained under pressure in the past three years due to regulatory uncertainties, the burden of sustaining historical growth rates on large bases and a stronger rupee among other factors. BSE's healthcare index rose at 35 per cent per annum on a compounded basis between March 2009 and March 2015.Since then, it has fallen nearly 15 per cent in absolute terms till August 2017.Sensex gained 15 per cent during January 2015 to August 2017.
"For the past couple of days, pharmaceutical counters like Sun Phar ma, Dr Reddy, Wockhard Pharma, Aurobindo Pharma and Lupin have rallied due to a good amount of long formation," said Sneha Seth, derivative analyst, Angel Broking. "Looking at the open-interest activity , we believe this space has further upside potential."
Early this week, Credit Suisse ungraded the rating of India's largest pharma company, Sun Pharma, to outperform from neutral with a target price of Rs 595.
