The Hindu Business Line : Ranbaxy: ‘Bought on rumour and sold on news’

Mumbai, June 11 The reason as to why the Ranbaxy stock had been moving against the general market direction since Monday became public when the company announced about the sale of a majority stake in it to the Japanese firm Daiichi Sankyo. Obviously, there were sections of the market that had a whiff of what was in the offing.

Rumours

Since Monday, the share price of the company has surged 6.5 per cent, even when the Sensex tanked more than two per cent. Although the Healthcare Index also rose by four per cent since Monday, this nowhere reflects Ranbaxy’s sharp rise. The stock was among the very few stocks that gained even when the broader markets were in the red. The volumes traded have also been substantially high since Monday.

There have been rumours about Ranbaxy for sometime, but no one knew the name of the buyer, said Mr Prashant Bhansali, Director, Mehta Equities.

Buy on rumour and sell on news, is what investors usually do, said Mr Sanjay Someshwar of Ventura Securities. “This is what has happened with the Ranbaxy stock until the announcement made by the Ranbaxy promoters. It is quite possible that investors had insider information on the deal, as a lot of people were involved in it,” added Mr Someshwar.

Sale agreement

Ranbaxy announced that Daiichi Sankyo would buy the entire promoter holding of 34.8 per cent, and also make an open offer to obtain another 20 per cent in the company. On Wednesday, after the sale agreement was announced, the share price of Ranbaxy Laboratories ended the day gaining just 0.01 per cent. This was after having surged a whopping six per cent during the day. The stock had zoomed to an intra-day high of Rs 592.7 during early trade, which is also the highest it has posted in over three years. However, the share closed flat at Rs 560.80.

“The stock did see quite a bit of a run up in the past three days, so it is not a surprise that post afternoon the share price dipped. There was obviously some amount of front running or even profit booking that bought down the price,” said a healthcare analyst at a brokerage.

Amongst the A-Group stocks, Ranbaxy recorded the highest turnover on the BSE on Wednesday. It made a total turnover of Rs 684 crore; a total of 1.19-crore equity shares were traded on the BSE today.

Other stocks sizzle

It was not just Ranbaxy that had a run up today, but the companies that are promoted by Ranbaxy’s promoter family also rallied. Zenotech surged 20 per cent, Religare (8.53 per cent), Fortis Financial Services (10 per cent), Fortis Healthcare (18.87 per cent), Krebs Biochemicals (4.92 per cent), Jupiter Biochemicals (13 per cent) and Orchid increased by 13.56 per cent.

“The valuation of Ranbaxy will definitely go up now with the stake sale. Its not just Ranbaxy that will benefit from it, but the companies promoted by the promoter family will also reap the benefits. Which is why we saw the share prices of these companies rise today,” explained Ms Anita Gandhi, Head of Institutional Business, Arihant Capital Markets Ltd.

The BSE Healthcare Index on the whole has seen a bit of investor interest in the past few days. It has outperformed the Sensex as it has risen two per cent since Monday. The Healthcare index has risen by 4.27 per cent in the past one week, while the Sensex has dipped 2.12 per cent.

“The stocks in the pharma sector did not rally as much as the other indices did during the recent bull run. And the healthcare sector has been seeing some defensive buying by the investors. During times of a falling and uncertain market, pharma stocks usually see selective buying as a defensive bet,” said Ms Gandhi.

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