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    Can pharma sustain the rally? Chakri Lokapriya answers

    Synopsis

    “There is a move towards more complex generics which are higher margin and are subject to less price erosion in the US and also in the advanced markets. The US has traditionally been stronger pricing wise versus Europe. Against this whole backdrop, Lupin and Cipla because of the move towards complex generics, look to be positioned well.”

    Chakri-Lokpriya2-1200ETMarkets.com
    "IT margins have come in weaker because of attrition, but pricing still is fairly strong and both large and midcaps will do well," says Chakri Lokapriya, CIO & MD, TCG AMC

    Is this just a one-day move in pharma or do you expect this rally to sustain going forward as well? If yes, which are your top bets in this sector?
    Pharma as a space has underperformed for the last couple of years and so the stocks are all extremely cheap. The demand dynamics have not really changed that much. There is a move towards more complex generics which are higher margin and are subject to less price erosion in the US and also in the advanced markets.

    The US has traditionally been stronger pricing wise versus Europe. Now against this whole backdrop, Lupin and Cipla because of the move towards complex generics, look to be positioned well and they have also underperformed for quite some time. So there is some catchup valuation to be made.

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    My understanding is that what Cipla is doing in the US is respiratory. They are doing albuterol, aren't they?
    Yes and that is not such a price sensitive sector. It is asthma related but where they have to improve, forget the medical parlance for it but basically how they meter it and the precision of the metering improves the efficacy of the drugs. That is what all these guys are working on and the bigger news and the fact is they have underperformed for a such a long time.

    Why are IT stocks like Birlasoft, LTTS trading at a premium to largecap IT stocks?
    If you look at Mindree, their margins actually held up despite attrition being close to 25%. While Mindree has a greater focus on financial services, LTTS has more of an automotive focus. Some segments there are doing better and smaller companies are growing faster. That is pretty much the story but the overall theme for IT remains the same, whether it is largecap or midcap. They are all on a very strong wicket of new order flows.

    Margins have come in weaker because of attrition, pricing still is fairly strong and both large and midcaps will do well. Mindtree is a good example where despite attrition of close to 25%, the company managed to hold on to its margins.



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    (What's moving Sensex and Nifty Track latest market news, stock tips and expert advice, on ETMarkets. Also, ETMarkets.com is now on Telegram. For fastest news alerts on financial markets, investment strategies and stocks alerts, subscribe to our Telegram feeds .)

    Download The Economic Times News App to get Daily Market Updates & Live Business News.

    Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.

    Top Trending Stocks: SBI Share Price, Axis Bank Share Price, HDFC Bank Share Price, Infosys Share Price, Wipro Share Price, NTPC Share Price

    ...more
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