Max Healthcare likely to see buying from active funds on Nifty inclusion, is it a good bet? 

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As healthcare firm Max Healthcare Institute is ready to join the Nifty 50, taking up a coveted spot, analysts expect a surge in buying, from not just passive funds, but active funds as well.

On September 30, the NSE indices will be reshuffled, with InterGlobe Aviation and Max Healthcare replacing troubled lender IndusInd Bank and auto player Hero MotoCorp in the benchmark index.

Since Max Healthcare is entering the Nifty 50, all the ETFs and index funds that are tracking the benchmark are required to buy the stock to reflect its new weightage and accurately track the index. Domestic ETFs and index funds have a total AUM of Rs 4,45,000 crore, tracking the Nifty. This, in turn, creates a large pool of passive demand.

However, according to Elara Capital, not just passive players, but active funds will rush to pick up Max Healthcare shares. According to the brokerage, active funds are underweight on the healthcare player by Rs 11,743 crore.

Unlike Indigo, wherein most active funds are already overweight, Max Healthcare is currently under-owned by most active funds. Elara suggested that as a result, the stock will likely attract incremental buying from active managers as well, both to align with the benchmark and to reduce their underweight exposure.

“Among the four stocks, Max Healthcare is the only one where rebalancing will drive significant buying, as active funds are heavily underweight across AMCs. The stock has also touched its 200-day moving average,” added Elara Capital.

What’s the word on the Street about Max Healthcare shares?

Largely, analysts are bullish on the counter. Around 16 analysts recommend a ‘buy’ call, while four suggest holding, and five brokerages issued a “sell” rating on the healthcare player.

Brokerages are positive on Max Healthcare’s strong volume-led growth, as the hospital chain’s capacity is likely to double to 9,400 beds by FY29E. With ~70 percent of additions to be brownfield, visibility of profitable growth is high, noted Nuvama Institutional Equities.

Further, apart from expansion, brokerages believe that the firm has ample levers for growth, like an improving payor mix (following breakeven in upcoming facilities), case mix (radiation oncology in Dwarka and Lucknow), and a heightened focus on international patients.

Max remains well-positioned, driven by tech-led clinical outcomes and strong retention (senior doctor attrition just two percent), added Nuvama. Increasing M&A (e.g. Max-Jaypee, ApolloNayati) points to consolidation over new supply and easing oversupply concerns.

Not just hospitals, but brokerages are optimistic on the diagnostics and home care businesses too, which are scaling up at a healthy pace by expanding into new cities and deepening their presence in existing cities.

Going forward, given the company’s demonstrated track record in ramping up such facilities, Emkay Global expects 20 percent revenue CAGR over FY25-28E, with an Average Revenue Per Occupied Bed CAGR of 2 percent, respectively.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.