Pharma Stocks Are Back In The Limelight, Here’s Why

Out of the six large and midcap stocks that have hit 52-week highs, 5 are from the pharma space. Dr Reddy's, Alembic, Biocon, Sun Pharma and FDC have all hit their 52-week highs.

Among the top gainers from the space is another pharma company - Aurobindo Pharma. The pharma index is constantly trading higher with each passing day. In fact, the Nifty Pharma index is up 2.53 per cent, even as the Sensex is down 500 points in trade today.

Coronavirus brings pharma sector back in the limelight

The sentiments have turned hugely positive for the pharma sector. Some of this is because of direct benefits from Covid-19 infections, while others maybe on account of favorable developments that might emerge, because of the coronavirus.

Select pharma stocks have benefited from the exports of hydroxychloroquine like IPCA Labs. Hydroxychloroquine API, prices have shot up dramatically in the last one month.

Hydroxychloroquine, an anti-malarial is known to have some benefits in treatment of coronavirus infections. However, the evidence is thin, mixed and uncertain. Nonetheless, companies manufacturing the same have seen stock prices surge.

Apart from this, there are hopes that there maybe quick and speedy remedy of issues that Indian manufacturing facilities have had with the FDA.

Pharma stocks have been languishing for the past 2 years as margins from the export business began to erode and compliance issues with the US FDA became for frequent. With the rupee plunging to record lows, investors see margins improving for pharma companies in India, most of which are big exporters.

Things are looking much better for stocks from the sector now and looks like for at least another couple of quarters, these stocks are likely going to be on fire.

Whether there would be a big change in fundamentals of pharma companies one year from now, nobody is sure. However, investor sentiments have changed and changed really fast over the last few weeks.