Global M&A deals, defensive bet aid pharma stocks: Value Research

The pharma sector has outperformed the broader markets over the last one month. As per data from Value Research, pharma sector funds as a category has given a return of 8.81%, while the Nifty moved up by 3.00%. The BSE is up by 6.4% in the same period.

According to analysts, there are a couple of reasons why investors are upbeat on the pharma sector. "With uncertainty on the Eurozone on the global front, and fears of a poor monsoon on the local front, many investors find pharma to be a defensive bet. Secondly, there are a number of global M&A deals happening in the pharma sector, which are driving up valuations" says Amar Ranu, Manager - Third Party Products, Motilal Oswal Securities. For example, GlaxoSmithKline Plc recently acquired Human Genome Sciences Inc for $3 billion.

Pharma companies continue to do well both in the Indian as well as overseas markets. As per a report by Motilal Oswal Securities, Indian pharma companies continue to do well in the US despite an intensely competitive environment.

With 100 plus US FDA approved facilities, India has the largest number of US FDA compliant facilities outside the US. In the Indian market, chronic segments like CVS, diabetology continue to record strong double digit growth given the changing lifestyle of the populations, especially in large cities. "Investors could have a 5-10% exposure to pharma stocks, in their portfolio," adds Amar Ranu.