The Hindu Business Line : Pharma stocks: Excise duty talk keeps them ill

PHARMACEUTICAL stocks, fairly in demand till recently, took a severe beating on Wednesday. Dealers said this was due to the uncertain environment surrounding contract manufacturing.

The talk is that the Government may impose excise duty on MRP. This move may not augur well for pharma companies. They have been reporting good growth due to contract manufacturing and now the decision to impose excise on MRP rather than on manufacturing cost is causing concern among market players.

The fear is that this segment of the industry could be affected, as the excise would be imposed not on the output cost thereby impacting their profitability. There is also fear that the companies would manufacture on their own rather than outsource to other companies.

On these fears, BSE Healthcare index fell 3.39 per cent and the fall was much more than other sector indices.

Among the stocks to fall on Wednesday include Matrix Laboratories, Glenmark Pharma, Cipla, Dr Reddy's and Ranbaxy.

Pedalling on `defensive' cycle

HOUSING finance company HDFC once again turned out a defensive player in a bearish environment.

Dealers said several value investors picked the stock of HDFC on Wednesday while exiting other stocks. In an uncertain environment, market players prefer to buy HDFC, as the stock price of the company does not fall in line with the overall market trend.

When the market rises, its (HDFC) returns are in line with the market. Dealers said the company's stocks have always given returns to the investors in the long term irrespective of the purchase price. This is due to the steady growth shown by the company and good prospects for housing finance business.

On Wednesday, the stock gained marginally by 0.64 per cent at Rs 722.80 on the BSE with volumes of 3.07 lakh shares; on the NSE, it closed at Rs 722.10, up 0.08 per cent, with volumes of 1.78 lakh shares.

Bottom fishing by FIs

WITH stock prices falling across the board on Wednesday, domestic institutions led by Life Insurance Corporation of India turned value buyers.

Dealers said LIC, UTI and some banks were seen picking leading index stocks such as Infosys, Tata Steel, Tata Motors, HLL and others. Dealers said the slight recovery in the stock indices (Sensex and Nifty) from the day's low was mainly due to domestic institutions purchases.

Virendra Verma

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