DRL, Wockhardt post double-digit market gains
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Singapore/Mumbai: The double-digit stock market gains of pharmaceutical giants including Dr. Reddy’s Laboratories (DRL) and Wockhardt stand out in stark relief to the dismal performance of other Asian emerging-market stocks this year. Their shares have surged on expectations of higher earnings driven by their expansion in the United States and India, faster drug approvals, and improved portfolio quality through acquisitions.
Continued strength in the dollar when the Federal Reserve raises interest rates will also boost their income. More than 40 per cent of over-the-counter and generic prescription drugs sold in the United States come from India.
In Mumbai, trading so far this year, Lupin Ltd has climbed 32 per cent, Dr. Reddy’s 31 per cent, Glenmark Pharmaceuticals 42 per cent and Wockhardt 29 per cent. That compares with a 6.9 per cent decline in the Sensex in late trade on Wednesday and a 16 per cent drop in the MSCI Asia Pacific ex-Japan index.
The share price gains in the drugmakers were supported by a weaker rupee, which has fallen 5.1 per cent against the greenback this year. “Large-cap Indian pharma companies are predominantly dollar exposed,” said Hemant Bakhru, pharmaceuticals analyst at UBS in Mumbai.
“Emerging-market investors who right now want to avoid risk and invest in assets that are more exposed to the US economy as against emerging markets will naturally choose some of these Indian pharma names,” he added.
Asia ex-Japan investors shifted to a “massive” overweight position in pharmaceutical firms in August from “underweight” in the previous month, making the sector their second-biggest exposure, according to Bank of America Merrill Lynch.
Heavy selling by FPIs after market’s fall:
The large cap stocks have suffered the most following the heavy selling by FPIs in the domestic equity market over the last one month. While the Sensex has slumped 8.59 per cent during the last one month, the BSE midcap index has managed to limit its fall to 6.80 per cent during the same period.
If we look at the return for the past one year, the BSE small and midcap index are still holding their head high with a gain of 3.22 per cent and 9.94 per cent respectively when compared to 5.06 per cent negative return generated by the BSE Sensex. Market participants cited high concentration of FPI ownership in large cap stocks for the underperformance of Sensex.
( Source : reuters/deccan chronicle )
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