Sectoral churning behind recent correction in pharma stocks; present valuations look attractive: Gaurav Mehta

In a chat with ET Now, Gaurav Mehta, VP -Institutional Equities, Ambit Capital, talks about the recent correction in the pharma pack.

ET Now: Can we have a quick word on pharma stocks? We have seen some decent correction. Lupin, for example, has fallen around 20 per cent from its recent peaks. What is your view?

Gaurav Mehta: There has been some fundamental developments in terms of Abbreviated New Drug Application (ANDA) approvals. Drug makers have actually been running ahead of the schedule. In that sense, you would see more approvals than you have seen over the past.

From that point of view, fundamental indicators does not look changing to the downside.

What you saw last week had more to do with bit of sectoral rotation. It had more to do with the fact that these quality names were commanding a hefty premium, which was perhaps a little unsustainable.

Post the recent correction, we do think that from a 12 month point of view most of these, several of the midcap pharma names and a quite a few of the large cap pharma names are very attractive. So, we have a positive bias for the phrama names. Look at them with one-year or higher time horizon.