Why diagnostic stocks have corrected around 50% from their 52-week highs

Diagnostic stocks have corrected sharply over the past few months with stocks down between 40 and 50 percent from their 52-week highs.

The market is fearing disruptive pricing emerging in the diagnostic industry. Tata owned Tata 1MG has published an advertisement indicating that they are offering popular lab tests for consumers at just Rs 100 as they enter the Bengaluru market. The same tests cost anywhere between Rs 500 and Rs 650 in the market.

The stocks have also corrected in the last one year due to rapidly rising competition with many bigger and smaller companies entering the segment. This competition is also resulting in lower pricing power which is expected to reflect in earnings and especially in margins.