Domestic pharmaceutical companies have exhibited earnings visibility, least stressed balance sheets, healthy free cash flows and ability to deliver products during a pandemic, said brokerage and research firm ICICI Direct. In the previous one-year, Nifty Pharma index has jumped 56% while the benchmark Nifty 50 index has managed to gain 24%, clearly hinting at the superiority of pharmaceutical stocks. “The Nifty pharma index has regained momentum after past three weeks healthy breather, signifying resumption of the primary up trend,” the brokerage firm said.
Based on technical analysis, ICICI Direct has carved out a list of stocks that makes a multi-cap pharma stock portfolio. Here, 44.2% of the stocks are large caps, 44.4% are midcaps while only 11.4% allocated to smallcap pharma stocks. “We have selected a blend of quality companies backed by decent promoter pedigree, respectable fundamentals that are either witnessing a) robust price structure or b) which have undergone significant price/time correction and currently poised with favourable risk/reward setup,” the brokerage said.
In the portfolio, Divi’s Laboratories has the highest weightage of 18% with just a single stock. In the last 6 months, the stock is up 32%. This is followed by Ajanta Pharma with a 17.8% weightage with two stocks in the portfolio at the initiation. Syngene International, the subsidiary of Biocon, also finds a 14.1% weightage. The share price of Syngene is up 23% in the previous six months.
Aurobindo Pharma has been given a 13.6% weight in the portfolio by ICICI Direct. Aurobindo Pharma is up only 7% in the last six months but since November has seen an uptick. Further, Cipla and Sun Pharma have been given a weightage of 12.5% each. Both the shares up gained in the range of 17-20% in the last six months. Sequent Scientific Limited is the stock with the least weightage on the portfolio with 11.4% assigned to it. In the six-month time frame, the stock is up 84%.
The portfolio is a medium-term, High-risk portfolio benchmarked with Nifty 500 index. According to ICICI Direct, the portfolio can be initiated at Rs 20,300-20,700 with potential returns of 8-15%.
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