June is usually a good month for drugmakers—with the Nifty Pharma Index returning gains in four of the last five years. Investors will hope this time is no different.
The gauge lost more than 9 percent in May, making it the worst performing sector in the previous month. It’s also fallen the most after public sector bank and real estate benchmarks this year, down nearly 15 percent. In fact, the pharma index ended with monthly gains only once this year—in April.
No doubt that valuations have corrected both in absolute and relative to the frontline indices, but the pharma story is still stock specific as there’s not much improvement in the macro picture except rupee depreciation, said Mahesh Patil, co-chief investment officer at Aditya Birla Sun Life Asset Management. “We can see a turnaround if individual companies get their drug approvals on time. In that case, pharma will outperform but once again it will be stock specific. Expect a turnaround in earnings by financial year 2020.”