Pharma companies set to gain, but be selective in the stocks you buy

In the surprising rally seen in the equity market since the Budget, pharma companies have emerged among the biggest winners. The BSE Healthcare index has surged over 3% in the past four sessions. Among its constituents, Aurobindo Pharma, Jubilant Life, Strides Sashun and SPARC have surged as much as 16% during this period.

Defensive Growth Story
Experts believe the story in the pharma space is not yet over and investors are looking into the space not only from a defensive point of view, but also from growth perspective.

“I like the pharma space, even with the rupee at $67-68 level, they are going to continue to make a lot of money. Perhaps their PE valuations are high. But they also seem to grow at 30-35%-plus numbers,” said Deepak Shenoy, founder, Capital Mind.

Dipan Mehta, BSE & NSE member, is fairly bullish on the sector and believes it would be among the biggest sectors to be invested in.
Look at Companies, Not the Sector
Rajat Rajgarhia of Motilal Oswal Securities cautioned investors to not look at the space as a top-down (industry first, company later) story. “I do not think big names are going to deliver returns anywhere close to what they delivered in last 10 years. This is a sector where you will have to keep on finding names from midcaps, which are going to grow mani-fold,” he said.

Ravi Dharamshi, CIO at ValueQuest Investment said: “Pharma story is going to play out. However, you have to be very selective in the stocks you buy.”