Pharma Stocks Outlook: Seen up as defensive bet next week

[N.Sukumar]

MUMBAI - Shares of pharmaceutical companies are likely to move up as
defensive bet as they are seen insulated from inflation worries.

This week, the BSE Healthcare Index fell in line with the broad
market.
Next week equities are seen weak on worries that Reserve Bank of India
may hike repo or cash reserve ratio rate after inflation touched a
13-year-high of 11.05% today for the week ended Jun 7.

Pharma shares may buck the trend and perform above average market's
performance.

However, more than frontline and mid-cap generic companies, it will be
companies with the contract research and manufacturing model, who
would be preferred.

Global pharma companies may be compelled to cut costs and resort to
contract manufacturing, leading to buying interest in Indian companies
with such model.

Divi's Laboratories, Jubilant Organosys, Dishman Pharma will hold
attention over frontline and mid-cap generic companies.

Technically, Divi's, Dishman, and Jubilant look weak on charts as
these
shares had attracted some buying and hence could go down on profit
booking.

Glenmark Pharma looks attractive on charts and may see an upside
despite correcting over 7% this week.

Among the frontline shares, Cipla is seen sideways while Dr Reddy's is
seen weak.

Dr Reddy's is seen down with support at 610 rupees. This week, Dr
Reddy's stock had fallen 10% and the declining trend is seen
continuing next week.

Sun Pharma and GlaxoSmithKline Pharmaceuticals are seen up with
resistance at 1,525 rupees and 1,153 rupees respectively.

We are advising investors to stay away from Ranbaxy for its
volatility.

Closing prices, in rupees, of leading pharmaceutical shares on
National Stock Exchange today, compared with a week ago:

Company Jun 20 Jun 13 %
Change

Cadila Healthcare 320.10
311.70 2.7
Cipla 212.10
210.90 0.6
Dr Reddy's Laboratories 655.05 727.80
(-)10.0
GlaxoSmithKline Pharmaceuticals 1,115.05
1,088.65 2.4
Pfizer 597.70 619.80
(-) 3.6
Ranbaxy Laboratories 542.35 566.85
(-) 4.3
Sun Pharmaceutical Industries 1,460.35 1,472.10
(-) 0.8

BSE Healthcare Index 4325.40 4494.02
(-) 3.7
Nifty 4347.55 4517.10
(-) 3.7
Sensex 14571.29 15189.62
(-) 4.1


N.Sukumar
Research Analyst