Pharma stocks on a roll, BSE Healthcare index hits new high

Sun Pharma, Ranbaxy, Cipla, Aurobindo and Biocon are up 1-3% on the Bombay Stock Exchange.

Pharmaceutical stocks continued their upward march with most frontline stocks trading at multi-year highs on the bourses.

Sun Pharmaceutical Industries, Ranbaxy Laboratories, Cipla, Aurobindo Pharma and Biocon are trading higher in the range of 1-3% on the Bombay Stock Exchange (BSE).

At 1025 hours, S&P BSE Healthcare index, the gauge of pharmaceutical companies, has surged 136 points or 1% to its record high of 12,067. In comparison, the S&P BSE Sensex declined 39 points at 26,061.

Sun Pharma (up 3.3% at Rs 744), Aurobindo (2.3% at Rs 787) and Cipla (2.2% at Rs 459) have touched their respective new highs, while Ranbaxy (up 2.6% at Rs 557) is trading at its highest level since November 2012.

Since June 26, Sun Pharma and Ranbaxy have rallied 18% each after USFDA granted approval to Ranbaxy's subsidiary Ohm Laboratories to manufacture and sell generic Diovan in the US. The benchmark index has gained 4% during the same period.

Meanwhile, analysts expect the pharmaceutical companies to post a strong revenue growth for the quarter ended June 2014 (Q1FY15), largely be driven by continued momentum in the US. Manoj Garg Research, an analyst at DSP Merrill Lynch expects growth momentum for the pharma companies to sustain with sales growth of 24%, EBITDA growth of 28% and profit after tax growth of 28% in 1QFY15 (April-June) over the previous year quarter.

"While revenue growth will largely be driven by continued momentum in the US, strong growth in the Rest of the World markets, higher currency realization (up 7% YoY; down 3% QoQ), 150 bps core margin expansion should drive net profit growth," he said in a client note.