Pharma Stocks Outlook for the week – 23 to 27.05.2016 (Mixed; weak rupee to aid, Cipla result eyed)

Pharma Stocks Outlook for the week – 23 to 27.05.2016
(Mixed; weak rupee to aid, Cipla result eyed)

Stocks of Pharmaceutical companies are seen trading mixed next week with Jan-Mar earnings providing fresh triggers and a weak rupee against the dollar lending some support. On Friday, the rupee ended at 67.44 per dollar--its lowest closing level since Mar 2. As exports form a major chunk of sales of most Pharmaceutical companies, the fall in the rupee against the greenback is seen as a positive. Weak sentiment in the broad market and regulatory issues faced by a number of Pharmaceutical companies will, however, continue to put pressure on the stocks.

Volatility in the market is expected next week due to the expiry of the May derivatives contracts on Thursday. Market participants will keep an eye on Jan-Mar earnings of Nifty 50 constituent Cipla, which are due on Tuesday. Cipla's consolidated net profit is seen rising 44.8% on year to 3.76 bln rupees in Jan-Mar, and net sales are seen up 13.9% at 33.96 bln rupees. The company's net profit should grow due to margin improvement, reduction in interest cost, higher other income, and lower tax rate.

Stocks of Cipla could see a rebound next week as they are in an oversold zone. Torrent Pharmaceuticals, Jubilant Life Sciences, AstraZeneca Pharma India, GlaxoSmithKline Pharmaceuticals, Natco Pharma, and Indoco Remedies are other key companies scheduled to release Jan-Mar earnings next week. Stocks of Lupin, which fell to a one-month low despite strong Jan-Mar results, are likely to consolidate next week but the bias remains largely negative. Concerns over regulatory issues at the company's Goa unit, a likely rise in costs due to integration of Gavis Pharmaceuticals, and limited visibility on meaningful products pipeline for the US may weigh on Lupin's stock.