Pharma Stocks Outlook
for the week – 19 to 23.09.2016
Positive; valuations
of large-caps favourable
Stocks of pharmaceutical companies are likely to trade with
a positive bias next week with buying
interest being supported by favourable valuations,
particularly those of large-caps. Improvement in
sales of domestic pharmaceutical products in July is also
seen keeping sentiment upbeat. According
to data from market research firm AIOCD-AWACS, the domestic
pharmaceutical market grew by
14.7% on year in July as against a growth of 9.7% in June,
led by robust sales of anti-infective and
respiratory drugs. Stocks of large-cap companies like Sun
Pharmaceutical Industries, Dr Reddy's
Laboratories, and Lupin have been under pressure due to
regulatory issues at their manufacturing
units and price erosion in products in the US. However,
looking at their current valuations, upside
momentum is expected in the medium term.
Moreover, these companies have taken sufficient remedial
measures at their plants and hence the
regulatory issues are likely to be resolved sooner rather
than later. Aurobindo Pharma is receiving
support from a strong product pipeline for the US market and
by good pace of product approvals. On
technical charts, the trend for Sun Pharmaceutical, Dr
Reddy's, Lupin, and Aurobindo Pharma is seen
positive. Cipla, which has gained significantly over the
last one month, may see some consolidation in the near term. The technical analyst is also positive on
Glenmark Pharmaceuticals and Divi's
Laboratories
in the near-to-medium term.