In line with other segments of Indian economy, the pharmaceutical shares also drifted down during January 2011 and the same trend continued in first week of February despite better financial performance in the third quarter ended December 2010 by pharma players and declaration of interim dividends. The low level of investors' sentiment on account of corruption charges, global clues, inflation, fast upward revision of interest rates and liquidity problem impacted the market adversely. Further, foreign institutional investors pulled out from the market put additional pressure.
The BSE Healthcare (BSE HC) index of 18 leading companies declined by almost 8 per cent during January to close at 6236.88 points from 6,763.34 points as at the beginning of the new year. The same trend has been seen in the first week of February and during first five day's of trading the BSE HC nosedived to 6071.17 The BSE HC index touched to its peak level at 6871.32 points on January 6, 2011 as against its 52-weeks lowest level at 4,689 on February 8, 2010. The majority pharma shares experienced selling pressure thereafter and moved southward session after session.
The Biocon scrip nosedived by almost 20 per cent form price of Rs.421.75 on December 31, 2010 and close at Rs.337.95 on February 4, 2011. Glenmark also went down by 19.1 per cent and closed at Rs.293.45. Cipla, Ranbaxy, Lupin also lost by over 12 per cent from end of 2010 prices and closed at Rs.324.20, Rs.524.50 and Rs.421.60 respectively on February 4, 2011. Cadila Helathcare, Wockhardt and Divi's Laboratories, however, managed to register small recovery at Rs.383.60, Rs.793.15 and Rs.656.85 respectively. Aurobindo and Opto Circuits lost over 10 per cent.
Investors ignored the financial working of several companies and started booking profits due to future uncertainties and risk factors. The pharmaceutical companies registered robust growth in top line as well as bottom line during the third quarter and nine months ended December 2010. So far nearly 40 companies announced their performance and their aggregate net sales increased by over 22 per cent and net profit by over 150 per cent during the quarter. During the first nine months of 2010-11, the aggregate net sales moved up by 22 per cent and net profit by almost 70 per cent. Thus the pharma segment is set to achieve strong growth in fiscal year 2010-11.
Dr Reddy's Laboratories reported net profit of Rs.273 crore during the first nine months ended December 2010 as against a net loss of Rs.522 crore. Wockhardt also reduced its nine months loss to Rs.71 crore from Rs.425 crore and Orchid Chemicals turned into profit of Rs.52.57 crore from a net loss of Rs.16.86 crore. Sun Pharma, Lupin, Cadila Healthcare, Glenmark Pharmaceuticals, Biocon, Opto Circuits, Alembic, Panacea Biotec Ind-Swift Laboratories and J B Chemicals reported handsome gains in profits. The foreign exchange adjustments impacted favorably during first nine months. After the announcement of results, Wockhardt scrip jumped to Rs.399.30, with higher circuit limit on BSE, from its previous closing of Rs.380.25. However, the scrip declined to Rs.383.60 on February 4, 2011.
The trend is likely to be continue during next few session as Union Budget is approaching near. Fear of rising inflation and liquidity problem will impact investor's sentiment adversely and put pressure on price movements. The global economic problem including unrest in Egypt and uneasy condition in other Middle East countries may push oil prices in near future. Though, the Indian pharma segment has received 142 ANDAs approval from US FDA during 2010 which will translate in growth in coming years, the poor investors support will hamper the price movement.