QIP-bound cos seen making most of Bull Run

heard-on-the-streetThe recent improvement in market sentiment has triggered a flurry of Quality Improvement Programme (QIPs) by Companies of late. Optimists have interpreted the fund-raising activity by companies as a sign that the bullish times are back. But a section of the investors refuse to buy this argument.

They believe that the rush for raising money is in anticipation that the recent strength in the market is unlikely to sustain. The sudden rush to place shares with institutional investors is to ease the pressure on their strained finances and should not be interpreted in any other way.

They argue that companies are not sure if they can command the same valuation a few months later. It remains to be seen if institutional investors will be wiser this time round. “If promoters claim that a recovery in the economy as well as the stock market is around the corner, then why they are in a hurry to dilute their stake cheaply?” asks one market participant.

Pharma stocks sparkle as Re gains against dollar

The recent strengthening of the rupee against the dollar has sparked investor interest in shares of mid-cap pharmaceutical companies such as Glenmark, Dishman, Biocon and Aurobindo Pharma. Market sources said mutual funds and high net worth investors have been accumulating these shares in recent days, resulting in some of them rising almost 30% in a week.

The renewed interest in these stocks is on a bet that a rising rupee against the dollar would ease the mark-to-market losses on their foreign currency liabilities, which had severely impacted the profits of several pharma companies last quarter. Abhishek Singhal, an analyst with Macquarie, says: “There is a huge opportunity for mid-cap companies, especially those who build capacity, when many products lose patent protection in the next two years.” Though the pharma sector has traditionally been seen as a defensive sector that neither shows dramatic returns in the good times nor gets impacted as much in the bad times, analysts feel that this impression is changing.