As the coronavirus pandemic engulfs global economies, the major stock market has taken a beating. Same is the story with stocks trading at Bombay Stock Exchange (BSE); indices at the BSE have tanked from a level of 42,000 in January to around 31,000 in the second week of April. Scrips across industries have witnessed major fall this period ranging from auto, steel, FMCG, etc. But as the countries sending requests of hydroxychloroquine to India, the pharma stock that was struggling for some time now has now resurrected.
As per a report in the Economic Times, the pharma stocks witnessed a big jump in its valuation with scrips gaining between 15 percent and 30 percent with some reaching their 52-week highs or nearing to that level. Last weeks' top gainers included Cipla and Cadila Healthcare while stocks of Strides Pharma, Ajanta Pharma and Bliss GVS Pharma jumped the least.
Positive effect due to a surge in demands of medicine
The investors' sentiment towards pharma stocks amidst any fundamental change or performance numbers has surprised many but it is justifiable. For a long time, the pharma stocks have been witnessing overselling and were due for a re-rating. These stocks reached their best level in 2015 and since then they witnessed a free fall due to regulatory actions, governance issues, and pricing measures in important markets. But huge demands for some drugs have given Dalaal Street to turn bullish on the pharma drugs.
Customer demand has tanked during this extended lockdown across the globe but pharma is among the few sectors that have attracted the investors' interest. These stocks are expected to do well in the short term at least. Edelweiss Broking has suggested five stocks for investors from the pharma sector. The brokerage house is betting on Ajanta Pharma, Abbott India, Dr. Reddy's lab, Laurus labs, Biocon. As per the estimations, these stocks are expected to give return between 10-25 percent in the coming days as the demand for effective drugs against COVID-19 is expected to up in the near future.
