market strategy: Tariff delay sparks relief rally in Indian pharma stocks: Sudip Bandyopadhyay

“The uncertainty is not around demand or the price hike but the uncertainties are company specific. JSW Steel, we will definitely want to hear what is their strategy about Bhushan Steel, that is a huge problem which has been created in the recent past post the Supreme Court order and one needs to understand how that will get disentangled,” says Sudip Bandyopadhyay, Group Chairman, Inditrade Capital. What is your overall sense on the pharma pack because within that interesting developments with respect to the stock prices that yes, the largecap pharma companies are doing well, but it is the mid and the small end of the space that is picking up momentum in terms of the stock price performance and especially those beaten down names, maybe a case like Granules, Natco Pharma they have not participated much in the couple of quarters, but what a rebound. If you can help us analyse that is there anything that is changing in terms of the investor sentiment or the market is trying to look beyond two-three quarters and trying to pencil in that.Sudip Bandyopadhyay: Well, of course, what has changed significantly is the tariff announcement by President Trump. There was a sword hanging on pharma sector and at different levels different figures were being thrown around. But finally, when the announcement came, it talks about very high 200% or whatever but it is after two years. So, obviously people immediately started talking about the fact that probably it will never come because if something gets pushed back by two years obviously there is no threat of imminent tariff on pharma products, so that was a fantastic news for most Indian pharma companies because most of them or at least a lot of them have significant business in US.

They do manufacture in India and supply to US, so they would have been adversely affected by the tariff and since that is not happening, that was the point from where pharma actually we started seeing significant momentum in largecap and some midcap pharma companies. As far as overall pharma is concerned Sun Pharma does look good because some of the molecules which they were expected to commercialise a bit later in the year is getting preponed and the commercial launch is happening in US very-very soon and that kind of enthused the investors about Sun Pharma.

Overall, they have significant business in US as well as India and both the markets are expected to do good. The pricing pressure on generics is, of course, there but that has kind of reached a level where we have seen the worst.

Of course, Glenmark did a landmark deal and it is not only for Glenmark, for the entire Indian pharmaceutical industry this was a landmark deal with R&D getting established and getting properly valued by global pharma players, so this was definitely landmark and of course, Glenmark investors were rewarded and will be rewarded further I am sure in terms of dividend or other some kind of payouts, so that is as far as Glenmark and Sun Pharma is concerned. But by and large Indian pharma can breathe a sigh of relief post the tariffs sword going away and it is back to business as usual and considering that most of the sectors are kind of still awaiting to know about the tariff and its implications, pharma is one sector where that has been taken care of. Hence, pharma is rallying, that is my view.What is your own sense when it comes to the metal pack and especially the steel because this time around not much expectation but going ahead even the industry body is looking out for a decent price hike from these levels. Help us understand that how you are analysing the impact of that on the stock prices in the times ahead.Sudip Bandyopadhyay: Well, it is definitely positive for the overall steel industry. We have to remember that globally also demand for steel is going up and naturally price hike in the domestic scenario is also expected. The uncertainty is not around demand or the price hike but the uncertainties are company specific. JSW Steel, we will definitely want to hear what is their strategy about Bhushan Steel, that is a huge problem which has been created in the recent past post the Supreme Court order and one needs to understand how that will get disentangled.

It is very critical for JSW Steel at this stage. Of course, coking coal prices of the entire industry will be interesting to understands the trend and what the management commentary is for multiple companies not only JSW Steel because that is a very-very critical ingredient as far as steel making is concerned.

By and large, we believe that the industry margins would have improved in this current quarter for which results will come out. Top line depends on company specific like JSW Steel had a scheduled maintenance, so obviously the volume will be low, but the margin improvement will be visible.