Pharma stocks surge upto 5% in otherwise weak market – what brokerage say in sectoral update

In an otherwise weak market, the pharma stocks are on roll as they surged up to 5 per cent on the NSE on Thursday. The Nifty Pharma is one of the top sectoral gainers as compared to 0.16 per cent fall in the Nifty. The pharma index has jumped by 3.5 per cent this week against to 1.5 per cent fall in the benchmark index.

In the 20-share Pharma index, Abbot India gained almost 5 per cent, followed by Pfizer up around 4.5 per cent and Zydus Life up over 3 per cent, while heavyweights such as Dr Reddy, Sun Pharma and Cipla each gaining between 2-3 per cent intraday on the NSE. These stocks are also among top Nifty gainers.

Other pharma stocks from broader markets such as Natco Pharma, Glenmark, Ipca Lab, Aurobindo Pharma, Biocon, and Granules each rose between 1-2 per cent in the Nifty Pharma index. While Lupin, Alkem and Star are among the top laggards during Thursday’s session on the NSE.

Pharma stocks have been lately surging along with FMCG stocks as the volatility in the overall market rises.

The Indian pharma sector is poised for mid-single to high-single-digit sales growth and margin expansion, Systematix Institutional Equities said in its sectoral report.

The brokerage’s positive outlook on sector stems from - likely easing of inflationary pressures; expected easing of price erosion pressure in the US; monetisation opportunities in complex generics, and secular growth potential in branded formulations (India and EMs).

Tailwinds from a potential cyclical upturn in oral sold pricing in the developed markets and scale up in China market for select players is something that Systematix not factored in its estimates. The companies now are cash positive and have strong FCF (Free Cash Flow) generation, which could leverage for opportunistic acquisitions, the brokerage added.