The announcement of proposals in Budget for the year 2006-'07 failed to cheer pharmaceutical sector and the pharma shares drifted down initially. The BSE Healthcare index of 27 major pharma companies opened at 3575.88 and touched to its lowest level at 3524.38 after the announcement of Union Budget. The share price of almost all companies suffered heavily. The major companies like Ranbaxy, Dr Reddy's Lab, Cipla, Lupin, Aurobindo, Matrix Lab, Nicholas Piramal, Sun Pharma, Wockhardt and MNC shares declined sharply in the inter day trading. At one point, Pfizer share moved down by Rs 37.30 to Rs 1000, Ranbaxy by Rs 11 to Rs 431, Lupin by Rs 19.85 to Rs 939.95 and Dr Reddy's share by Rs 13.75 to Rs 1302.
A Pharma analyst pointed out that though there is no special concession for pharma segment, the overall Budget is better for corporate sector growth. The importance given to core sector like construction, power and rural sector will automatically give necessary boost to every segment of economy. The pharmaceutical industry was expecting concessions on R&D investments, reduction in excise duty and tax exemption on foreign exchange income earned with respect to intellectual property rights. However, the Finance Minister has ignored all these demands of the pharma sector. The Budget reduced customs duty to 5 per cent on 10 anti-AIDS and 14 anti-cancer drugs. The minimum alternative tax increased from 7.5 per cent to 10 per cent and imposed CVD on all imports. These proposals impacted adversely the price movements of shares initially on BSE.
After the initial adverse reaction from investors, the pharma shares started improving. MNC shares moved up significantly after initial impact. Aventis Pharma, GSK and Wyeth improved by Rs 10.50, Rs 4.70 and Rs 24 respectively in the mid-session. Similarly, few domestic companies like Cadila Healthcare, Cipla, Glenmark, Matrix Lab, Orchid Chemicals, Sun Pharma and Wockhardt recovered on investors' supports.
The BSE Sensex touched to its lifetime peak level at 10,409 in Post Budget rally with the major contribution from FMCG, capital goods, metal, automobile and banking stock. However, the Pharma share movements were restricted initially with some positive movements in the latter part of the day. The BSE Health Care index closed at 3553.78.