Ashok Kumar, theIPOguru, is a man of few words. So, when he speaks, investors and particularly those chasing the IPO Rainbow with
the proverbial 'pot of gold' at the end of it, listen carefully.
Increased volatility and uncertainty have made defensive pharma stocks a must in one’s portfolio. The increase in these stock prices in the last quarter was primarily led by better than expected results posted by the companies in this space. Strong domestic demand coupled with increasing preference for generics worldwide helped the companies deliver improved results.
Overall, Contract manufacturing is expected to gain momentum going forward and emerging markets as well as the US would be a key growth driver. Going forward, with the improvement in economic conditions in the US, most companies are likely to witness good growth in their US business. The performance of MNC pharma companies which was hampered in FY09 due to trade issues, sale of non-core assets and rising input costs also reflected decent growth over the last two quarters.
Notably, the pharma sector funds have registered good growth numbers by outperforming most sector funds and benchmarks. Franklin and Reliance Pharma Funds have been the major out-performers.
The small size of Franklin Pharma Fund’s Assets under Management (as per latest data available on 31st March, 2009), makes it vulnerable to redemption pressures and despite good returns, appears to be uninspiring. Same holds true as regards the Assets under Management for SBI and the UTI schemes.
While the Reliance Pharma Fund’s holding primarily comprises Indian companies and those focused on the CRAMS segment, it has very limited exposure to MNC’s from this space. While those with higher risk appetite may consider fresh investment in this scheme, informed investors may be better off buying at regular intervals in select Pharma MNC companies to provide the required stability in these volatile market conditions.
Tata Life Sciences & Technology Fund, although not a strict comparable, has been an outperformer. Its primary exposure is in the IT segment followed by Pharmaceuticals. It has held on to Aventis, Cadila Healthcare and GSK Pharma. However, as on 31/10/2009, its AUM remains relatively small, enhancing the risk profile of this scheme.
