71%: The return from the S&P BSE Healthcare Index over the past one year.

Business Standard
15th October

71%: The return from the S&P BSE Healthcare Index over the past one year.

  • The Healthcare Index has given a return of 71 per cent over the past year. The sector is performing at a time when several others aren't.
  • A number of factors are responsible for the sector's stellar show. As the table below shows, healthcare underperformed between 2016 and 2019. It is bouncing back now.
  • Large-cap Indian pharma firms are major exporters to the US, a market in which companies are not allowed to brand their products and charge higher prices based on product differentiation.
  • A key reason the sector was struggling earlier was that several players had entered the commoditised US market, increasing competition and bringing down margins.
  • Indian manufacturers, however, enjoy a cost advantage. Many competitors have thrown in the towel now and exited the US market. With competition thinning, the returns of Indian pharma majors are improving.
  • In the past, Indian factories were subject to scrutiny by the US Food and Drug Administration (US FDA). But now, manufacturers in the country have got their act together and have become more adept at meeting American standards.

Disclaimer: This information is from a third party—Business Standard—offered through a tie-up to Kotak Securities customers. Click here for complete disclaimer.

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