Pharma pricing policy to hurt Cipla, Ranbaxy, Lupin: Vijay

PN Vijay, Portfolio Manager, askpnvijay.com, says that companies like Cipla and Ranbaxy would be largely affected by the pricing policy because they have large presence in domestic life saving drugs space and to some extent affect will be seen on Lupin. There would be nervousness among investors in these three stocks. 

Also Read: Sudarshan Sukhani advises to go long; suggests stocks  Below is the edited transcript of his interview to CNBC-TV18. Q: How do you see this whole Parliament session panning out over the next few days? That in the near-term seems to be the trigger that the market is watching closely?
A: The Parliament may have a patch-up and resume trading from Monday. Right now the government has an upper hand and is feeling lot more confident with the total rejection of Mamta’s initative. The only issue that is holding up things is whether FDI retail discussion is with voting under 184 or without voting under 193. We may see some business happening from next week. Q: What did you make of the Hindustan Copper offer for sale and the price that is been set out. Do you think it will garner much interest or attention?
A: The price is fair to garner interest. Hindustan Copper is a very thinly traded stock not like NALCO or NTPC. The government holding is so high that it is subject to many speculative activities but it is a good property and an excellent mine. I think the government by using various stratagems may get Rs 30000 crore. Hindustan Copper sailing through will be slightly positive for the market. Q: Do you think NTPC issue will go through? Two years back they did an issue at Rs 200. Is there appetite at Rs 165 or will LIC buy most of it?
A: I don’t see a great appetite at Rs 165. The government managers should rethink that unless they pre-sold the issue with a basket of investors it will be off the shelf. Last time when NTPC came in and bailed out Coal India there were comments that it will not only affect the image of the government, but it will also affect the buy side of the market for sometime, it will remove LIC for sometime from the buying side. I hope that the scene is not repeated. Q: The pharmaceuticals space was active yesterday. What is your view on the pricing policy and any impact for some of these stars like Glenmark etc.?
A: The pricing policy has many ramifications. India is known for keeping the essential drug prices very, very low for disease like diabetes, hypertension, tuberculosis and the government has stuck on it. I think there will be a cut in price of 260 odd essential drugs which would affect mainly people who are in the domestic space in life saving drugs. The multinationals will surely be affected. I think Cipla and Ranbaxy would be largely affected by the pricing policy because they have large presence in domestic life saving drugs space and to some extent affect will be seen on Lupin. There would be nervousness among investors in these three stocks.   Q: How would you approach Pantaloon?
A: Only high beta player and an extended risk taker should enter the stock. I don't expect FDI in retail to become a reality soon. I don't say that Wal-Mart or Carrefour will invest in Pantaloon tomorrow but if FDI in retail happens like IKEA, then a huge move can be seen in Pantaloon. One has to wait and be prepared for some gyrations. I think in one year's time there would be FDI in multi-brand retail and Pantaloon would be one of the biggest beneficiaries. Q: What is your view about the rally which we saw in paper stocks yesterday? Is anything a compelling buy from that basket?
A: No. Paper stocks are very commodity and there are no large stocks to buy. Ballarpur Industries Limited (BILT) which is the biggest player is not touched by market cap very high to attract large institutional interest. Unlike cement, which is a strong domestic sector, paper is also a strong domestic sector, but they are ridden by import competition. I do not see a great fundamental change and there is lack of liquidity. In today's market there should be strong market volume because F&O also drive shares to some extent and for sometime the paper stocks are at best catching middle investors' eyes. I do not think this is an unsustainable thing for large investors to enter. Q: What is your view on Blue Dart and the offer for sale which has come through from the parent company?
A: Blue Dart is a good name and is a leader in one of India's fastest growing businesses and strong parented. Unfortunately the courier sector is not treated like a consumer sector. It is more into logistics sector, which is not correct. The whole sector needs to be looked at more closely and Blue Dart is a very strong name in that sector and the help of the parent, etc so it is a good buy but I have not deeply checked the financials. Q: Do you think the worst is over for Bharti?
A: I think the worst is over. I think they are getting the 2G licenses at much lower prices than expected. Secondly, Infratel and some other disinvestments should improve cash flow and the reduce interest. In the case of Bharti the intensity of competition has decreased tremendously. Investors should expect 15-20 percent gains in next two years. I think the downsides are extremely limited in Bharti. Q: What will drive the market beyond this trading range after the September rally we have got stuck in a 200 point or 100 point rut on the Nifty? What's the next big impulse you think?
A: The next big impulse would be Parliament doing something constructive and RBI cutting CRR in the mid-term policy review in December. All that will lead to financials, the whole group of financials and automotive sector are clearly to watch for in the next few months because the rate cycle is down and demand is slowly picking back in the economy. It can be seen in the October numbers of many companies so both these would drive the banking and NBFCs like LIC Housing, Shriram Transport, Mahindra and Mahindra Finance and rest of it. In automobile sector, Telco is under pressure but I think these would ride the next rally.