Sector Update: Pharma

Sector Update: Pharma

In line with our expectations, mid-cap pharmaceutical stocks have been re-rated in the past few weeks. And rightly so, as some of these companies have healthy growth outlook and as the huge valuation gap between mid-cap and large-cap pharmaceutical stocks was unjustified.

Post the recent sharp re-rating of mid-cap pharmaceutical stocks the valuation gap has narrowed down considerably and it is time to be very selective now.

From our universe, we prefer Cadila Healthcare (Cadila), Ipca Laboratories (Ipca) and Torrent Pharmaceuticals (Torrent).

Notwithstanding the recent run up, we believe that these three mid-cap pharmaceutical stocks have upside triggers and scope for further re-rating from current level.

The current volatility should be used to accumulate these mid-cap pharmaceutical stocks for meaningful upside over the next 6-12 month period.