In turbulent market conditions, investors look to fast moving consumer goods (FMCG) and pharmaceutical sectors, though the latter’s performance of late has not been too impressive.
Compared to the Bombay Stock Exchange (BSE) Sensitive Index, Sensex, the BSE-Healthcare index has underperformed in the last three months when it has plunged 10 per cent vis-à-vis the benchmark index’s fall of 8.43 per cent. In the last one month, the Sensex has turned slightly positive (2.56 per cent), but the Healthcare index has fallen 4.05 per cent. Seven out of the 10 stocks that comprise the healthcare index were in the red during this period.
However, on an annual basis, the pharma index has been quite strong. While the Sensex slipped 44.76 per cent, the pharma index fell just 24.14 per cent.
Among the pharma index stocks, Glenmark Pharmaceuticals and Divi’s Laboratories have been the biggest losers over the last three months. While Glenmark has lost over half of its value, Divi’s has seen a 27 per cent fall.
Glenmark was punished due to loss of milestone payments, royalties and the fact that the company was likely to miss its FY09 guidance.
| INVESTMENT SAFE HAVEN | |||
| 1 mth | 6 mths | 1 yr | |
| BSE Healthcare | -4.05 | 35.84 | -24.14 |
| BSE FMCG | 2.48 | -6.49 | -6.06 |
| Sensex | 2.56 | -36.40 | -44.76 |
Expectation of a poor Q3 from Divi’s was the reason for its underperformance. The company reported lower revenues in the custom synthesis segment and a 20 per cent year-on-year dip in net profits due to forex loss for the December quarter.
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Among large cap stocks, Sun Pharma, which has a 17.56 per cent weightage, the second highest after Cipla, has lost 10 per cent over the last three months due to the FDA warning letter to its subsidiary Caraco, the continuing battle for the control of Taro and expectations of falling Protonix sales.
While reasons for the underperformance are company-specific, Ranjit Kapadia, Head (Research), PCG, Prabhudas Lilladher, said that the inclusion of non-cash items has resulted in lower profits for a majority of companies.
In addition to this, revenues have been impacted by the global meltdown due to lower export of formulations. Sarbjit Kour Nangra, Vice President (Research), Angel Broking, said that the numbers at the top line and operating level weren’t too bad. But higher interest costs dented net profits, Nangra added.
Index of the other safe haven, the FMCG sector, has been the best performer in 2008. Investors have been able to preserve capital over the year (0.19 per cent return). Even their monthly returns are better at 4 per cent.
Heavyweights ITC and Hindustan Unilever (HUL) have given 3 per cent and 4.5 per cent returns respectively over the last one month. HUL has been the star performer, giving investors 20 per cent returns over the last one year.