Mutual funds and renowned Dalal Street investors stocked up on pharmaceutical companies in the September quarter, believing that the worst in terms of regulatory and competition concerns are priced in.
Shareholding data for the quarter ended September 30 show mutual funds have raised stake in most pharma companies from a quarter ago, with Aurobindo Pharma seeing the highest increase of 1.27%. Investor Rakesh Jhunjhunwala has raised stake in Lupin by 0.13% to 1.89% in the September quarter.
Besides Aurobindo Pharma, mutual funds have also raised stake in Lupin, Sun Pharmaceutical Industries, Torrent Pharma, Cadila Healthcare and Natco Pharma by 0.15-1.14%. "Local mutual funds continue to be positive about large pharma stocks.
After the sector underwent pain from generic competition and regulatory issues, they feel that the negatives have been discounted. Growth in revenue and profi ts may still be one or two quarters away but worst may be in the price," said Deepak Jasani, head of research at HDFC Securities.
Activity on foreign portfolio investors' side has been mixed. They have cut stake in Lupin, Sun Pharma, Aurobindo Pharma, Torrent Pharma, Cadila and Natco, but they have raised stake in Biocon, Jubilant Life, Divi's and GSK Pharma.
AK Prabhakar, head of research at IDBI Capital Markets said margin pressure will continue but downside risks are limited. "From a long-term perspective, pharma is looking attractive," said Prabhakar.
