Continuing with its dream run on the stock markets, the domestic pharma sector outperformed the sensex in 2010, recording a gain of nearly 34%. The BSE-Healthcare index-comprising of top performers like Sun Pharma, Biocon and Dr Reddy's-bettered the 17% returns clocked by the sensex during 2010.

The good performance can be attributed to the robust growth in domestic pharma market, which is expected to grow by 19-20% in 2010, up from 15-16% in the previous year. Among the top performers, Sun Pharma's registered a gain of 57.5%, while Lupin 61.1%, Biocon nearly 53% and Dr Reddy's nearly 46%.

The gains were not limited to only home-grown companies; multinationals like GSK posted an over 46% increase, while Pfizer India was up 20.1% and Merck 24.3% for the year.

Ranjit Kapadia, VP institutional research, HDFC Securities, says: "The pharma market's growth at a strong 19-20% rate is reflected in the companies' share prices."

Armed with strong fundamentals, the sector is expected to post strong growth this year as well, analysts say.

Says Probir Rao, managing director, Jefferies India: "The strong fundamentals of Indian pharma industry coupled with strategic interest in domestic formulation and continued growth in generics provide a strong support for the Indian pharma stock valuations."

Dishman Pharma is probably the lone company which registered a degrowth of 34% last year.

Pharma companies have posted some of the best returns as against other sectors. "Large caps (companies) have followed the earnings growth momentum, while mid-caps like Lupin and Cadila were re-rated during the year," says Sarabjit Nagra VP research, Angel Broking.

Healthcare stocks Apollo Hospitals and Fortis Healthcare also registered steady gains of nearly 39% and 7.3%, respectively.

India is a $12-billion market with strong growth in domestic formulations (medicines), and the demand is being fuelled by economic development and strong purchasing power. It is also one of the few markets globally to have posted a steady and consistent double-digit growth over the last couple of years.

Source: India Brand Equity Foundation
Date: February 1, 2011