Market Movers: Two factors that triggered big spike in Sun Pharma

MUMBAI: After Dr Reddy’s Laboratories’ 10 per cent collapse on Wednesday, investors believed it to be the beginning of the end of the bull run in the sector. Today’s 10 per cent surge in Sun Pharmaceutical Industries has laid those suspicions to rest.

Sun Pharma’s 10 per cent rise came after the company’s firm but lower-than-expected numbers for the quarter ended June. More importantly, the gains came as the company suggested that its arm has finally settled a multi-year antitrust lawsuit with the US government.

Ironically, the biggest driver for Dr. Reddy’s collapse two days ago was a subpoena issued to the company by the Securities Exchange Commissions for alleged improper practices in certain geographies.

The other factor that drove investors to rush to bid for Sun Pharma’s stock is the fact that the company did not make any mention of pricing pressure in the US. Remember, both Dr Reddy’s and Alembic Pharma cited growing price erosion in the US as reason for their subdued earnings.

Sun Pharma, instead, reported both year-on-year and sequential rise in its specialty products portfolio and expressed confidence of continuing the trend ahead. Clearly, talks of the pharma bull market drawing to a close were premature.

The June quarter earnings may not sound the end of the bull market for pharma stocks, but it is surely telling investors to choose their bets more wisely.

Graphite electrodes back in fashion
Shares of HEG and Graphite Electrode had gone off the boil in recent months after a swashbuckling rally in the first quarter of 2021. That rally has resumed again on the perception that if demand for Indian steel will rise going ahead due to lower Chinese exports, then so will demand for graphite electrodes.

Further, investors are of the view that global demand for graphite electrodes will rise as more companies invest in enhancing capacities to meet the resurgence in global demand post Covid-19. Shares of HEG rose 2 per cent, while those of Graphite India climbed 2.6 per cent.

Stinker sequential earnings
Shares of Motilal Oswal Financial Services, one of the biggest brokerages on the land, sank 11 per cent after a poor set of numbers for the June quarter in what has been a strong demand environment for brokerages. The company saw a sharp sequential decline in revenues and net profit likely indicating the impact of the second wave of the Covid-19 pandemic on operations.

The weakness was largely down to the asset management business where the company said that sequential revenue fall was due to accrual of performance fees and sharing of profit on exit from alternate investment fund operations. Further, the performance was dented by higher provisions as the home finance business took a hit due to Covid.