Is Pharma Sector A Safe Haven In The Falling Market?

The Pharma sector has made higher highs and lower lows in a period of one year owing to various factors at play.

Around the Globe

On 23rd June 2016, putting all the anticipations to rest, the United Kingdom finally decided to leave the European Union. In the following days, pound declined drastically against the dollar. This in turn gave a huge jolt to the major global economies.

The leaders of the drug industry of Europe expressed their fear that Brexit would create confusion; particularly over drug regulation and market access before the event and soon after Brexit those fears became reality. The UK’s main industry association declared this "creates immediate challenges for future investment, research and jobs in our industry."

The turmoil and uncertainty that resulted from Brexit, shook the very root of most of the sector and left the pharma sector in a state of confusion across the globe.

India in the middle

India is expected to be the third largest market for pharmaceuticals by the year 2020 in terms of incremental growth. India’s filing of Drug Master Files’s (DMF’s) with USFDA as of December 2013 totals to 3411. This is the DMF highest filed by any country in the world. Total export of Drugs, Pharmaceuticals by India for the year 2013-14 at USD 15,095 million, saw a record growth rate of 2.5 per cent over the corresponding period of previous years.

Last 12 Months of Pharma

The Nifty Pharma Index fell from a high of 13489 in October 2015 to 10335 approximately in the end of June, post Brexit. However in the last two months the index showed some signs of recovery.

Movement post budget

Post budget the index have given a positive return of 5.86 per cent against the 26.13 per cent movement by NSE benchmark Index Nifty. The last there months, however, have seen a return of 10.9 per cent. But no matter what, Pharma is has given the least return after the Nifty IT Index.

The most active shares of the sector

Piramal Enterprises has given the best return in the last 1 year by giving a huge movement of 115.83 per cent. In the last trading session, we have seen that the stock has given a little correction and has dropped 1.75 per cent. On 9th September 2016, Piramal Enterprises share price closed at Rs 1,870.35 apiece on NSE. Owing to the strong fundamental Piramal Enterprises is recommended as a multibagger stock by Dynamic Levels research team.

The next best performer of the lot is Divis Lab. Since Budget the share gave a movement of 41.76 per cent. Divis lab is one of the Top 500 shares suggested by Dynamic Levels. Divis lab share price 1,324.15, down by 0.64 per cent on NSE in the last trading.

Though Cipla shows to be in the red zone in last one year, we can see that it recovered since last 6 months. In the last trading session the share declined by 2.46 per cent. Cipla share price closed at Rs 580.50 apiece on NSE.

The opportunities in Pharma Sector

• The pharmaceuticals industry of the country is expected to account for about 3.1-3.6 per cent of the global pharma industry by value and currently accounts for 10 per cent by volume, by the year 2016.
• Industry revenues are expected to expand at a CAGR of 12.1 per cent during the period 2012-20 and reach USD 45 Billion.
• The healthcare sector of the Country is expected to grow to USD 250 Billion by the year 2020 from USD 65 Billion currently.
• The generics market is expected to grow to USD 26.1 Billion by 2016 from USD 11.3 Billion in 2011.