Over the past couple of years (even more in some cases) pharma companies have outperformed a strong market. If you notice it is not just Ajanta, but a whole host of names from the sector that have corrected significantly from their peaks.
This has more to do with the fact that FIIs/ funds/ HNIs are looking to take some of their profits off the table, which is but natural. These investors as others would have made significant returns over these past couple of years in a lot of these names and are now looking to lock in some of their gains –
Why now? In my opinion its because a lot of these names have gone from being undervalued to being fairly and in some cases over valued. This would mean that they may not be able to provide out-sized returns at least in the short to medium term.
If as an investor you have a long term view of the business/ industry I don’t think these corrections are anything to worry about. Whether or not this provides a buying opportunity though is very stock specific and is dependent on your understanding of the future potential of the business.
Personally, I would not blindly go out and buy the names that are falling – we tend to do that more out of a price anchoring bias.
Buy if you truly understand the business and its growth path and believe that the current price does not completely reflect current or future value.
Disc: Pharma companies > 60% of my PF
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