Pharma Stocks Outlook for the week -04 to 08.07.2016 (Positive next week; Dr Reddy's may gain more)

Pharma Stocks Outlook for the week -04 to 08.07.2016
(Positive next week; Dr Reddy's may gain more)

The positive momentum in stocks of pharmaceutical companies may continue next week due to
improved sentiment as no fresh regulatory issues have surfaced in past few weeks. In fact, a number of companies have come out with statements that the US Food and Drug Administration has not made any critical observations relating to non-compliance of good manufacturing practices at their plants in the recent inspections. On technical charts, too, the trend looks firm for pharma companies. Last week's gains in (Nifty 50) pharma index are a good sign. It could rise to 11350-11380 zones, and if it breaks above these levels on the higher side, then we can see some 6-8% more upside. The sector has been reeling under stress for over a year as regulatory issues at manufacturing units of many companies have affected earnings. However, there is a hope that things will start improving now.

If you see, these days most companies are saying that no Form 483s have been issued to their plants in recent inspections by US FDA. Companies like Dr Reddy's and Sun Pharma have said they have taken remediation measures and will invite US FDA for re-inspection. This has improved the sentiment. Sun Pharmaceutical Industries had said earlier that it will request the US FDA to re-inspect its Halol unit, which got warning letter in December, by June-end.

In May, Lupin said the US FDA had cleared its Mandideep and Aurangabad units. On Thursday, Strides Shasun said its Bengaluru unit had cleared US FDA inspection. Alembic Pharmaceuticals also said on Thursday that its Panelav unit has cleared US FDA inspection. JB Chemicals and Pharmaceuticals said earlier this week that US FDA had cleared its Panoli unit.

Among midcaps, Alembic Pharma, Glenmark Pharmaceuticals, and Bliss GVS Pharma are seen
trending on a stronger note. Glenmark could see 8-10% rise in the next couple of weeks. In pharma, would advise buying on dips. Select large-caps will rise but mostly the upside will be driven by