Since last Diwali, pharma stocks have burnt up ₹1 lakh cr of investor money

Almost all firms in the segment have been plagued by heightened USFDA inspection

The Indian stock market has kept most investors happy in the year since last Diwali, with the benchmark indices giving double-digit growth. However, nearly 150 companies from the BSE 500 basket have disappointed investors, giving negative returns. Among these wealth destroyers since last Diwali, pharmaceutical companies have been on the forefront.

Multiple problems

As the BSE Healthcare index sank, thanks to the various issues troubling the sector, over ₹1.1 lakh crore of investors’ wealth was wiped out.

Major players in the sector such as Sun Pharma, Lupin and Dr Reddy’s Labs are the top losers, losing over 25 per cent of their market capitalisation during this period. Almost all the pharmaceutical companies were plagued by heightened US regulatory inspection, increased global competition, consolidation of consumer units (wholesale) in the US market and pricing pressure in the domestic market, affecting the sales and the margins of these companies.

The implementation of GST has also taken its toll on these companies. Another important factor that played a key role in the decline in prices is the revision of the National List of Essential Medicines (NLEM). This has put pressure on drug prices. Orchid Pharma gave a negative return of over 50 per cent while Ajanta Pharma declined over 35 per cent.

Other notable losers in BSE 500 include companies such as Videocon Industries, which fell 85 per cent as the company is burdened by a huge pile of debt and is facing difficulty in managing its operations.

Similarly, Reliance Communications plummeted 64 per cent due to competitive pressure in the telecom industry and high debt.

Tata Motors, IDBI Bank, Force Motors, Dish TV and Amara Raja Batteries are some of the other laggards that eroded investor wealth.

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