Bullish on two pharma stocks in near term: Sudip Bandyopadhyay, Inditrade Capital

Sudip Bandyopadhyay, Inditrade Capital-1200

It will be determined by the corporate results that come out next week. A whole lot of interesting results are lined up. By and large, we believe the markets are showing positive trends. There are global uncertainties. The slowdown in China is particularly worrisome. But there is a silver lining since the India growth story is to a great extent intact. Even the latest numbers which are coming from the global large organisations project that India is going to be probably the fastest growing large economy in the world. That will reassure global investors and the India investment momentum should continue. All that will help Indian markets. So, corporate results will be the key determinant but we have a positive bias as far as the markets are concerned.

What is your view on TCS and IndusInd BankNSE -3.24 % which declared numbers this week and saw corrections?

TCS has performed very well. The way they have moved their business towards digital, cloud and the latest areas of technology is quite commendable. Of course, the US market rebound has helped them big time. They have been able to take initiatives and gain business and market share. Performance-wise, it has been fantastic. But I would not recommend a buy in TCS at this level because the stock looks a little tired at this stage. It has moved up and has done what probably it was supposed to do. I do not see a major upside in TCS immediately but it is fundamentally a good stock.

For a long-term investor, if somebody wants to have IT in their portfolio and is willing to wait for a year, you can go and buy TCS at current levels.

As far as IndusInd bank is concerned, operational performance has been decent. They have an issue with IL&FS investment and that has been bugging them. They have been writing that off in a phased manner and that is getting reflected in their accounts. Otherwise, I do not have much complain as far as IndusInd Bank is concerned. They have has a good performance but valuation wise, I would not recommend a buy in IndusInd Bank at the current stage.

The stock has corrected as expected because a margin of error at that kind of valuation is very limited. The high value stocks are expected to correct post the results even if there is a little bit of deviation in any one of the parameters.

Any picks in the near term?

I have been bullish on the pharma space for some time and there are lots of reasons. Predominantly on the back of US generics market recovering, the pricing pressure is coming down. Indian companies also have been able to control cost as far as their US operations are concerned. The margins in US are definitely stable, if not improving.

About 25% of the market for the Indian pharma is in India and about 15-20% CAGR is expected depending on the company and the sector they are operating in. So, I remain bullish on pharma. Natco Pharma in the pharma space has been our recommendation for investors with a one-year time horizon. We have a target of about Rs 900. Apart from that, investors can look at Auro Pharma as well. Again that is looking pretty good at current valuations.