Hope rally in diagnostic stocks may fizzle on disruption in OPD services

Lower surgeries and rising costs also likely to impact earnings; valuations too are rich

Investor sentiment towards diagnostics firms has improved in July, adding to gains seen in the April-June period. While recovery in business volumes after the 25-30 per cent hit during the lockdown has helped, the rise in Covid-19 testing by private players will support volumes and revenues.
 

Hence, shares of Dr Lal PathLabs (hit a new high this week), Thyrocare Technologies (12 per cent from its 52-week high) and Metropolis Healthcare have risen 14-20 per cent in July. However, investors need to be cautious.

For one, outpatient department (OPD) services and elective surgeries are yet to return to normal. And, the