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Informist, Friday, Aug 16, 2024

MUMBAI – Pharmaceutical stocks could be subdued next week as the recent return of some risk appetite in global financial markets could cause rotation of funds back into cyclical sectors, said analysts. The Nifty Pharma index has been the top gainer among sectoral indices on the NSE over the past two weeks, with a gain of 1.5% for the month so far. The pharmaceutical sector was not only seen as a defensive bet in times of caution, but the stocks were also deemed to be reasonably valued. 

Positive US economic data, including softer retail inflation and robust retail sales numbers, have helped investors shrug off recession fears this week while hopes of an interest rate cut by the US Federal Reserve as early as next month fuelled a rally across global equities, noted Prashanth Tapse, senior vice-president of research at Mehta Equities. On the whole, the sentiment could remain in favour of risky assets next week, said dealers. 

Moreover, recent gains in the pharmaceutical sector have made stock valuations "full", and multiples are no longer attractive, said Kotak Institutional Equities in a note. The brokerage has placed other defensive sectors such as consumer staples and information technology services in the same class when it comes to valuations, but said the reasons for gains in these sectors were different. 

Most drugmakers either met the Street's expectations for Apr-Jun earnings or exceeded those marginally. Overall, the pharmaceutical sector saw net profit growth of 28% on year during the June quarter, but the performance varied across the sector, noted brokerage Elara Securities. The US generics business remains the primary growth driver, even as contract development and manufacturing companies face persistent challenges, it said.

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Following are the resistance and support levels for the sector's key stocks for next week, as per calculations based on their prices on the National Stock Exchange:

End

Reported by Apoorva Choubey 

Edited by Deepshikha Bhardwaj

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