The Hindu Business Line : Pharma stocks outperform others

AFTER being ignored by stock market for some time, pharmaceuticals companies' shares have attracted market attention with the sector outperforming other sectors in the last one month.

The interest in pharmaceutical stocks is due to various factors such as strong sales, international alliances, growth from US generics drug market and basic research progress, analysts said.

Investors' interest in pharma stocks is also due to the rise in international crude prices as its impact on the sector would be minimal compared to other sectors.

Even IT sector, which is also insulated from crude prices, has not been able to provide similar returns as concern over the profit growth continues, feel market experts.

A comparison of various sectoral indices of the BSE shows that the BSE Healthcare index has gained 15.80 per cent in the last one month followed byBSE Consumer Durable index 13.65 per cent. Returns from other indices are: Bankex (12.58 per cent), BSE-PSU (11.34 per cent), FMCG (10.10 per cent), Capital Goods (9.71 per cent), Oil & Gas (8.85 per cent), Auto (7.90 per cent) and IT (5.09 per cent). During this period, the BSE Sensex gained 9.05 per cent.

According to investment banking firm DSP Merrill Lynch: "The Indian pharmaceutical sector continues to be at the threshold of an exciting growth story buoyed by strong sales, growing pipeline, international alliances and strong cash positions".

The firm said the growth is primarily driven by five drug sector themes, which are continuing US generics momentum, competencies in pharma outsourcing, generic biologic initiatives, product patent transition and basic research progress.

"We expect these themes to govern stock momentum for the various sets of companies in the sector," it said.

The buying interest in pharmaceuticals stocks continued in today's trading both in the frontline and mid-cap companies. Some of the stocks that gained include Biocon (up 2.15 per cent at Rs 544.10 on the BSE), Cipla (up 1.67 per cent at Rs 286.05), Divi's Lab (up 4.06 per cent at Rs 1321.45), Glenmark Pharma (up 10 per cent at Rs 235.70), IPCA Laboratories (up 2.58 per cent at Rs 645) and Lupin Laboratories (up 2.63 per cent at Rs 710.95).

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