Nifty Healthcare Index Stock: Analysts recommend buying as it could rise by more than 19%

The last one year has hardly been a time for the healthcare stocks. Yes, there has been some selective buying in healthcare stocks, but more as a defensive bet. But, the problems of healthcare stocks have been numerous. Firstly, the US generics market has been seeing intense competition. With the rising competition on one side and the consolidation of vendors on the other side, the costs have been beaten down sharply. That has impacted the profits of healthcare companies and a classic example is the way Indian pharma companies have been trying to diversify their risk by looking more at markets like India, Asia Pacific, Middle East, and Africa. Of course, the US still remains the largest market and hence it determines the profitability of the Indian healthcare companies.

How did the Nifty Healthcare index perform?

Here is a quick look at the Nifty Healthcare Index performance.

Data Source: NSE

Here are some key takeaways.

• Over the last one year, the Nifty Healthcare index has gained around 4.8%. However, out of the stocks in the index, 13 stocks have given positive returns and 7 have given negative returns.
   

• If you look at 1-month returns, then only 3 stocks have given negative returns while 17 have given positive returns. That is a lot more reassuring in terms of momentum. The short term momentum seems to be turning positive for healthcare.
   

• A more critical approach is how they look vis-à-vis their yearly highs. There are 8 companies down over 20% from the highs of the year. The index itself if 15.5% below the high point of the year. That makes it an attractive price point.

Why the bullishness?

Now, the bullishness is stemming from the forthcoming US elections which is likely to bring this issue to the headlines. The cost of healthcare in the US has been a big issue and India has traditionally been a major contributor to lowering healthcare costs in the US through the generics route. That is what makes this US elections of 2024 important for the Indian pharma companies.

While Indian pharma companies have been trying to de-risk and spread their franchise, the US still remains a major market. The expectation is that the next government would focus on lower cost of healthcare in a big way, especially considering the way inflation has hit the US consumers. For quite a few years now, the Indian pharma companies having a strong presence in US generic markets have been witnessing pricing pressure.

The feeling now is that margins cannot get squeezed any further. Already, the rate at which the margins get squeezed has slowed down sharply in recent months. This could be an important election for the Indian pharma industry and they hope that the tough times that the Indian pharma companies are facing in the US generics market would finally come to an end.