Pharma stocks regain investors' interest

-

'Plenty of growth opportunities for generic cos'

Mumbai, May 26 The market might be in a very volatile phase but the pharma stocks seem to be quite fortified from the market volatility.

While the BSE Sensex declined 4.54 per cent during the last one month, the BSE-Healthcare has been up 0.60 per cent during the same period.

"The pharma stocks are defensive stocks and they tend to outperform most stocks during a bearish phase," said Mr Bhavin Shah, Research Analyst, Dolat Capital Ltd.

"Pharma companies keep reporting sustainable numbers. Their stocks have a steady, strong and sustainable performance; and so in times of bearish markets they provide capital protection," said Mr Shah.

"The pharma sector had not performed very well earlier as the growth opportunities were lying in other sectors. So when the other stocks were battered during the past couple of months, these stocks showed both stable earnings and earnings visibility," said Ms Sarabjit Kour Nangra, Research Analyst, Angel Broking Ltd.

With life expectancy rates increasing and with life-style related disorders on the rise, there is always a market for pharma products. So even if the economy slows down these stocks are bound to do well, said Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets Ltd.

The worst period for generic companies was CY05-CY07, says a Motilal Oswal research report. This was due to increased competition, innovators making aggressive price cuts, currency appreciation (in the case of exporters) and very few new launches due to a lesser number of patent expiries.

Growth opportunities

This has changed now, according to analysts, as there are a number of growth opportunities for generic companies.

"Lot of products are scheduled to go off patent in the next few years leading to a lot of growth opportunities in this segment," said Ms Nangra.

Indian generic companies have also initiated cost-cutting measures and implemented de-risking drives, mentions the Motilal Oswal report.

Outsourcing opportunities are also increasing and companies are also ramping up their Contract Research and Manufacturing Segment plans, said analysts.

"Indian companies gain due to cost advantage," added Ms Nangra.

MNC pharma companies also stand to gain from a strong patent regime, said analysts.

"They have large amounts of cash in their balance sheets and have delivered high dividends," said Mr Shah.

The pharma companies also command a huge domestic market which is growing by more than 9 per cent, and this provides a cushion against the vagaries of the international markets, said an analyst with a broking firm.

Pharma stocks seem to have caught the investor's interest once again as a capital protection option due to the long-term steady returns they are able to provide, feel analysts

Popular posts from this blog

IOB capitalises on hike in stake by LIC

-
Indian Overseas Bank rose 1.53% to Rs 46.45 at 10:31 IST on BSE, after the biggest domestic instutional investors Life Insurance Corporation of India hiked its stake in the state-run bank. The bank made this announcement after trading hours on Wednesday, 25 March 2009. Meanwhile, the BSE Sensex was up 126.19 points, or 1.31%, to 9,794.09. On BSE, 31,003 shares were traded in the counter. The stock had an average daily volume of 1.93 lakh shares in the past one quarter. The stock hit a high of Rs 47 and a low of Rs 45.95 so far during the day. The stock hit a 52-week high of Rs 156.80 on 2 May 2008 and a 52-week low of Rs 37.55 on 9 March 2009. The mid-cap bank stock had underperformed the market over the past one month till 25 March 2009, falling 3.17% as compared to the Sensex's 8.60% rise. It had also underperformed the market in the past one quarter, declining 33.94% as compared to the Sensex's 1.04% rise. The bank's current equ The current price of ...
Read more

Lok Housing & Constructions builds on fund raising plans

-
Lok Housing & Constructions jumped 6.99% to Rs 107.90 at 11:20 IST on BSE ahead of a board meeting to consider fund raising options from both foreign and local market, including an institutional placement. Meanwhile, the BSE Sensex was down 50.50 points, or 0.30%, at 15203.73. On BSE, 1.86 lakh shares were traded in the counter. The scrip had an average daily volume of 4.74 lakh shares in the past one quarter. The stock hit a high of Rs 115 and a low of Rs 102 so far during the day. The stock had a 52-week high of Rs 390.50 on 1 January 2008 and a 52-week low of Rs 96.25 on 12 June 2008. The scrip had underperformed the market over the past one month till 12 June 2008, falling 26.55% compared to the Sensex's 10.18% decline. It had also underperformed the market in the past one quarter, falling 31.39% compared to Sensex's 3.24% fall. The small-cap housing projects developer has an equity capital of Rs 42.88 crore. Face value per share is Rs 10. The current...
Read more

economic times picks

-
CMP: Rs 70.50 Target Price: Rs 90 CLSA Asia-Pacific Markets maintains an 'outperform' on Jagran Prakashan, with a 12-month price target of Rs 90. "An economic slowdown notwithstanding, improving literacy and income levels in Hindi heartland imply that drivers for Jagran's growth are still in place. With a 35% ad rate hike in 2008, Jagran continues to narrow the gap with its more expensive English rivals," the foreign brokerage said in a client note, after a Q&A reply from the management. "Rising newsprint prices have made Jagran cautious on launching new editions in FY09 and its focus this year will be profitability. While management has budgeted for a minor increase in FY10 newsprint prices, it believes that prices are likely to peak in Q2FY08 and decline thereon," it added. Neyveli Lignite CMP: Rs 117.15 Target Price: Rs 160 MERRILL Lynch has maintained its 'neutral' rating on Neyveli Lignite, with a price target of Rs 160 ...
Read more