The shares of pharmaceutical companies are seen up next week amid volatility in the broad market.
However, fundamental and technical analysts are divided in their opinion on the movement of pharma stocks. More than frontline stocks, it is the shares of mid-cap companies such as Glenmark Pharma and Piramal Healthcare that look attractive, said an analyst at a domestic brokerage.
There are global concerns over rising inflation and the pharmaceutical sector is one of the sectors that is insulated from it. Therefore, pharmaceutical shares would be preferred in a volatile market, dealers said.
Oil companies: May weaken on rising crude
The shares of state-run oil marketing companies are likely to weaken further next week if crude oil prices continue to rebound after having eased to around $112-levels until last week.
The price, which has been declining steadily in the past several weeks, was reversed in the last few days due to escalating tension between the US and Russia. There are concerns that Russia may disrupt the oil supplies after the US and Poland signed a missile-shield agreement.
The three state-owned oil marketing companies are likely to incur a gross revenue loss of Rs 6,670 crore on subsidised sale of oil products in the fortnight started August 16, sharply down from the preceding fortnight due to easing crude oil prices. The aggregate loss posted by the three companies during August 1-15 was Rs 9,030 crore as against Rs 11,335 crore in the month-ago period.
Banks: Weak on monetary tightening
Banking shares are likely to remain weak next week on looming concerns of further monetary tightening measures by the Reserve Bank of India. Inflation for the week ended August 9 has risen to 12.63 per cent.
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Banks’ credit has grown 2.8 per cent during April-August compared with a fall of 0.1 per cent a year ago.
In the short term, investors are likely to remain cautious on the banking sector as they wait for negative factors such as slowing credit growth and lower treasury income to play out, analysts said.
However, many banking analysts are hopeful the recent hikes in benchmark prime lending rates will ease some pressure from net interest margins.
Private sector banks’ net interest margins will improve more than state-run banks as the latter have not hiked all segments of floating loan rates.
For instance, State Bank of India has hiked its BPLR by 100 basis points, but said it will not hike home loan rates of up to Rs 30 lakh for existing and new customers. Similarly, SBI has not hiked existing auto and education loan rates.