Angel Broking: Markets end lower during the week; BSE Healthcare - The safe haven

Markets end lower during the week
Markets ended on a weak note at the end of the week, with the Sensex
ending lower by 1.0% and S&P CNX Nifty ending lower by 0.7%. However,
BSE mid-cap and small-cap indices outperformed the large-cap indices,
ending the week in green. The BSE mid-cap index closed 1.4% higher, while
the BSE small-cap index closed higher by 1.0%. The strong momentum of
the markets was carried forward into the week, with the markets remaining
strong during the first half. However, the markets witnessed selling pressure
over the last two days of the week, backed by sluggish global cues. The BSE
FMCG index led the fall, with a decline of 3.1% during the week, followed
by the BSE PSU index. However, the BSE healthcare index showed remarkable
resilience in the face of falling markets, increasing by 3.2% during the week.
BSE Healthcare - The safe haven
The BSE healthcare index gained 3.2% during the week, outperforming the
Sensex by 4.2%. Pharma and healthcare companies such as Apollo Hospital,
Biocon, DRL and Orchid Chemical contributed the most to the rally, gaining
17.5%, 12.7%, 5.8% and 5.4%, respectively. As per media reports, Biocon
is likely to receive US $200mn as up-front payment from Pfizer on the
out-licensing of its insulin portfolio, which would involve transfer of rights to
Pfizer to market its drugs in the U.S., the EU and some emerging markets.
In case of Orchid Chemicals, the company expects U.S. approval for
Imipenem shortly and targets to post EPS of Rs20 for FY2011E and Rs24-25
for FY2012E. On the back of rich valuations, we continue to recommend a
bottom-up approach for the sector. We recommend investing in Cipla,
Cadila Healthcare, Indoco Remedies and Dishman Pharma, while we
continue to prefer Lupin and Ipca Labs at lower levels.