For Quick Alerts
For Daily Alerts

Pharma, FMCG: No more the real defensive stocks

 Pharma, FMCG: No more the real defensive stocks
The week saw pharma and FMCG stocks cracking for the first time in many months. These stocks have been labelled as defensives, pushing their stock prices to dizzying heights, even as the traditional brick and mortar companies have seen their stock prices crumbling.

Investors have begun realising that stocks in the FMCG and selectively in pharma have become horribly expensive. Stocks like Hindustan Unilever have dropped from a 52-week high of Rs 720, to the current price of Rs 600. ITC on the other hand has fallen from Rs 380 to the current price of Rs 320.

Pharma is no different. Lupin Labs has seen its stock price fall from a high of Rs 907 to the current levels of Rs 807.

Pharma sector has been reeling under pressures from FDA and worries over its impact on the pharma sector in India. Wockhardt has fallen from Rs 1729 to the current levels of Rs 380. Ranbaxy has also fallen on similar worries, though, on Thursday the stock rallied almost 30% on hopes of a revival in US sales.

The real worry for the sector is that share valuations are extremely high. If results do not match expectations these stocks can start falling as has been the case with the results of Lupin.

Also, along with pharma stocks the FMCG stocks have been heavily overpriced. At 40 times price to earnings, Hindustan Unilever is certainly expensive, even considering its book value.

Clearly, it's time to sell the heavily priced FMCG and pharma stocks, though one might want to continue to nibble into the IT space.

Some analysts are recommending to take a contrarian bet on some infra and banking spaces, as should there be a slight hint of economic recovery these stocks could be on fire.

Read more about: hul itc lupin
Story first published: Saturday, August 10, 2013, 9:44 [IST]
Company Search
Enter the first few characters of the company's name or the NSE symbol or BSE code and click 'Go'


We use cookies to ensure that we give you the best experience on our website. This includes cookies from third party social media websites and ad networks. Such third party cookies may track your use on Goodreturns sites for better rendering. Our partners use cookies to ensure we show you advertising that is relevant to you. If you continue without changing your settings, we'll assume that you are happy to receive all cookies on Goodreturns website. However, you can change your cookie settings at any time. Learn more