After outperforming Nifty50 in 2023 on sustained FII, DII inflows, will Nifty Healthcare sustain momentum this year?

The Nifty Healthcare index, which comprises stocks of 20 hospital, diagnostics and pharma businesses, regained its mojo last year, finished 2023 with a stunning return of 32.9 per cent driven by strong buying by domestic and foreign institutional investors, sharply outperforming benchmark Nifty50’s 20 per cent rise.  

Healthcare was one of FIIs’ top sectoral bets in 2023, where they poured in a net $1.5 billion, whereas DIIS turned overweight on the space more recently.  

Can you expect momentum in healthcare to continue on Dalal Street in 2024? 

The rally in healthcare stocks was driven by strong margins, rising footfalls, and rising average revenue per occupied beds (ARPOBs) —a key measure of income for healthcare businesses, wrote analysts at financial services company Avendus in its January newsletter.

Echoing similar views, Omkar Kamtekar, Research Analyst at Bonanza Portfolio, said that the income level of the country’s demography has increased, with the individuals proactively undergoing health check-ups leading to a material increase in volume growth for diagnostic players. The elevated penetration of insurance has allowed people easier access to hospitals, which led to an increase in the number of beds occupied and the average revenue per occupied bed, he said.  

The analyst also pointed out that out of many stocks within the healthcare sector, from baskets such as hospital, pharmaceutical, diagnostics, that witnessed material jumps in the topline and profitability on account of COVID-19, which boosted their valuations to sky high levels, underwent price correction of up to 50 per cent as the pandemic related revenues receded and the global economy weakened. 

Nevertheless, as recessionary fears receded, demand from global markets is seen getting back on track, which fuelled optimism in the year gone by, he asserted. 

A sector full of market action 

High investor interest in the sector is reflected in the increased deal activity across primary as well as secondary markets, noted the Avendus report. 

While IPOs of Concord Biotech, Blue Jet Healthcare, Mankind Pharma, Jupiter Hospital and Yatharth Hospitals hit the Street in 2023, there were seen block deals in some of the stocks from the sector, including KIMS, Syngene, MedPlus and Mankind Pharma, it noted.