Investor perception of the pharmaceutical sector in general, and pharma stocks in particular, has improved markedly following the outbreak of the COVID-19 pandemic. However, veteran investor Samir Arora, founder and fund manager, Helios Capital Management feels that excitement about the sector may be overdone. In fact, he feels the pandemic could have an adverse effect on most pharma companies, near term.
“If we are obsessed about COVID, will you eat extra medicines for diabetes or for heart (ailments)?, Arora said in an interview to CNBC-TV18.
"You may wash your hands a few times. So there is no such advantage. Maybe the US, for whatever reason, has become kind towards India and giving some faster approvals, and second, it is a market issue," Arora said.
According to him, data shows that every year about 90 stocks out of 300 – just 30 percent stocks do well every year.
"Therefore the thing is that the relative position of pharma within India has changed because other sectors have been badly hit.
Let us not give it some big picture that people will buy more medicines, in fact, they might be buying less medicines right now because all the hospitals are effectively closed for surgeries and people are trying to do everything while sitting at home and maybe they have bought extra medicines for two months because they are worried that the chemists might close down in between,” he said.
Arora says that he will not buy stocks just because they have fallen 50-60 percent.
“Buy the stocks, which are down 15-25 percent because that looks like a fair starting point and maybe buy two-three stocks which are down 50 percent on the basis – this looks good and if things go back to normal even after a year or one and a half years and these prices go back to what they were in February then there will be a great return," Arora said.
"We bought one hotel company on the basis that three years later if the price is what it was in February, effectively it is near double,” he said.