Healthcare Index hits all-time high

Ranbaxy, Sun Pharma, Lupin, Biocon are among key stocks that are trading at their respective 52-week highs

Pharma stocks were on a roll and propelled the S&P BSE Healthcare Index two per cent to close at a record high of 11,260 on Friday. The index touched high of 11,278 in intra-day deals. In comparison, the benchmark index, the S&P BSE Sensex and the CNX Nifty ended flat.

On Friday, the up move was led by Ranbaxy, which surged 5.4 per cent to Rs 497 on reports that it had received the US Food and Drug Administration (US FDA)’s nod to sell a generic version of Novartis’ hypertension medicine, Diovan. The stock hit a 52-week high of Rs 510 on the BSE in intra-day deals. “This is a positive development for Ranbaxy, as this was one of the key drugs awaiting US FDA clearance. On a very conservative basis, the drug can add $200 million to Ranbaxy’s top line (if it launches the drug at a 40-50 per cent discount to the innovator’s branded version and manages to corner half of the market share in the US) and $30 million to the bottom line in the 180–day exclusivity period,” said Sarabjit Kour Nangra, vice-president of research with Angel Broking.

Besides Ranbaxy, Divi’s Laboratories, Sun Pharmac-eutical, Strides Arcolab, Lupin, Biocon, Dr Reddy’s and Wockhardt are trading at the respective 52-week high and moved up another one to six per cent on Friday. “The up-move in most pharma stocks has been on the back of improving fundamentals over the past few quarters. The concerns regarding rupee appreciation have also abated, for now. So, from a core business viewpoint, pharma companies are better placed. Even if we compare them with another defensive play like IT, these companies have a better opportunity and can grow faster,” points out Sunil Jain, vice-president, equity research, at Nirmal Bang.

Dr Reddy’s Laboratories was another prominent gainer that added another two per cent to its previous day’s gain of one per cent on reports that the company has launched generic Paricalcitol capsules used for treating secondary hyperparathyroidism associated with chronic kidney disease in the American market, following approval by the US health regulator.

Nangra of Angel Broking maintains remains positive on Lupin, Biocon, Ranbaxy and Sun Pharma and maintains an accumulate rating on them given the recent run-up. “We remain positive on Ranbaxy and believe that the stock can appreciate around 8–10 per cent from the current levels provided the merger with Sun Pharma gets through,” she adds.

Jain prefers Dishman Pharma among the mid–cap pharma stocks and likes Lupin, Aurobindo Pharma and Ranbaxy from a long–term perspective among the large–caps.