Pharma stocks rally again as investors look to defensives

Pharma stocks were in the limelight once again as investors sought refuge in defensives. Cipla was up 1.25 per cent in trade, while Lupin hit a 52-week high of Rs 926 on the National Stock Exchange.

Ranbaxy Labs was up another 4 per cent, taking the month’s gains to 10 per cent. Dr Reddy’s, Aurobindo Pharma, Divis and Glenmark were the other notable gainers from the pharma space in trade today.

Pharma stocks along with IT stocks have been rallying sharply in trade as investors continue to take shelter in defensive stocks.

The other defensive stocks like Information Technology stocks have also been gaining ground. Dealers say that investors have been selling banking stocks and gradually buying into defensives.

Blue chip company stocks from the healthcare and IT industry have been the best performing so far this year.

However, valuations for these companies now seem stretched, with several of the companies, particularly from the pharma sector quoting at rich price to earnings multiples.

Most of the pharma stocks are heavily owned by foreign institutional investors, always making them vulnerable to any FII exit. Also, some of them having been facing issues with the US FDA, thus allowing for share price destruction.

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