This Article is From Dec 16, 2020

Year 2020: These Pharma, IT Stocks Have Given Over 50% Return This Year

In 50-scrip Nifty basket, there are 33 gainers so far this year, led by IT and pharma- or healthcare-related stocks

Year 2020: These Pharma, IT Stocks Have Given Over 50% Return This Year

Divi's Labs, Dr Reddy's Labs and Cipla have emerged the biggest Nifty gainers this year.

Domestic stock markets registered wild swings in calendar year 2020, with the benchmark S&P BSE Sensex index registering its worst loss ever in absolute terms, in March, and bouncing back to touch record highs in December. The coronavirus outbreak, out-performance by technology and pharma shares and a subsequent liquidity-driven rally have been the dominant market themes this year. Investors are still weighing the impact of government measures on tackling the pandemic amid still-rising infections, say analysts. 

During this period, some investors have grown wealthier and wiser with their bets. In the Nifty basket of 50 shares, for example, there are 33 gainers so far this year, led by IT and pharma- or healthcare-related stocks. 

Here are the year's biggest Nifty winners of 2020 (at current levels):       

  • Divi's Laboratories: +95.67%
  • Dr Reddy's Laboratories: +74.91%
  • Cipla: +64.51%
  • Infosys: +57.29%
  • HCL Tech: +52.02%
  • Asian Paints: +41.96%
  • Wipro: +41.46%
  • Mahindra & Mahindra: +34.22%
  • Tata Steel: +33.21%
  • JSW Steel: +33.12%

The top three Nifty stocks this year are Divi's Laboratories, Dr Reddy's Laboratories and Cipla, up 96 per cent, 75 per cent and 65 per cent respectively. Analysts say pharma and healthcare stocks are poised to continue their upmove on optimism around the coronavirus-related opportunities. 

"The pharma sector made a solid comeback from the lows of March 2020 after a lacklustre movement for much of 2019... COVID-led drug tailwinds, with pre-stocking to have ended in the first half of 2020, could bring the focus on vaccine manufacturing and distribution capabilities in 2021, especially if a large 30-40 per cent of population is to be inoculated," said Bhavesh Gandhi, lead analyst-institutional equities at Yes Securities. 

Most of pharma stocks including large caps such as Dr Reddy's, Aurobindo, Cipla, Lupin and Sun Pharma have rebounded sharply from March lows, he said. However, the real outperformance came from Active Pharmaceutical Ingredient (API) companies like Laurus Labs and Divi's Labs which would have benefitted from pricing tailwinds, he added. 

Mr Gandhi is positive on Dr Reddy's, Aurobindo Pharma, Cadila and Wockardt, which he thinks would be key beneficiaries apart from Serum in the unlisted space. "Any vaccine-related opportunity would be one-time in nature and accordingly we do not ascribe any significant weightage to vaccine opportunity when picking stocks for 2021," he added. 

And here are 10 laggards on the index: 

  • Eicher Motors: -89.29%
  • IndusInd Bank: -38.51%
  • Coal India: -32.81%
  • UPL: -24.38%
  • Indian Oil: -23.82%
  • ONGC: -22.63%
  • BPCL: -18.27%
  • SBI: -18.16%
  • Axis Bank: -17.89%
  • NTPC: -12.47%

Banking and financial service stocks, which have the maximum weightage on the Nifty 50 benchmark index (39%), followed by IT (16%) and oil & gas (13%), took a back seat. The Nifty Bank and Nifty PSU Bank indices are down 4 per cent and 26 per cent this year respectively. (Also Read: Sensex, Nifty Rise Over 10% In 2020)