Health care and pharma stocks witnessed a sharp rise in domestic stock markets on the back of the positive sentiment created by the passage of the landmark health care bill in the US.
While shares of top pharma companies, including Ranbaxy Laboratories, Piramal Healthcare and Cipla, rose between 1.5 and 2 per cent, some of the other companies including Piramal Lifesciences, RPG Life, Bal Pharma and Suven Lifesciences climbed 13-20 per cent. Aurobindo Pharma, Cipla, Dr Reddy’s Laboratories, Glenmark Pharma, Lupin and Divi’s Laboratories also rose.
The US government plans to reduce health care costs by introducing the bill. The Obama administration is expected to commit $1 trillion of taxpayers’ money over the next decade to help an estimated 32 million uninsured Americans get health coverage.
The bill also promotes use of generic drugs that are often one-tenth the price of the original version, but has the same impact. Following the passage of the bill, multinational firms may now be willing to put more money to buy into India’s formulations companies.
Although, analysts opine that this would translate into huge opportunities to Indian companies with the country having the largest number of US Food and Drug Administration approved pharma plants outside the US, brokers said the sharp rise in stocks was just sentimental.
“There is a feeling that demand for generic drugs would go up in the US, which will benifit the Indian companies operating there. However, the rise in stocks on Tuesday is a knee jerk reaction,” said Ambrish Baliga, vice president of equities at Karvy Stock Broking.
India was among the 14 countries named in the Congress discussion that can offer low-cost drugs to achieve lower health care costs.
While the key benchmark index Sensex of the Bombay Stock Exchange rose 0.23 per cent, the BSE Health care index rose 1.54 per cent and was the top gainer among the sectoral indices on BSE.
The BSE Health care index has outperformed the market over the past one month till 22 March 2010, gaining 7.91 per cent as compared to the Sensex’s 7.23 per cent rise. However, it had underperformed the market in the past one quarter, rising 2.88 per cent as compared to the Sensex’s return of 4.30 per cent.
