Most fund managers believe that the coronavirus outbreak will affect the pharmaceutical industry negatively due to the supply-chain issues in China. However, there are two small-cap stocks that continued to break this belief and have risen up to 140 percent this month.

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Suven Life Sciences and Shilpa Medicare are the only two stocks from the pharma space that have continued to rally despite escalating deaths over coronavirus. Since the beginning of February, the share price of Suven Life Sciences and Shilpa Medicare has climbed 141 percent and 93 percent respectively.

Last week, ICRA revised its outlook on the Indian domestic pharma industry from stable to negative due to the escalating fears in China.

The credit rating agency said that the pharma industry is heavily dependent on China for raw material imports. The disease affected country accounts for 65-70 percent of active pharmaceutical ingredients (APIs) and other intermediaries coming into India, which poses a challenge for the sector.

However, according to Haitong's research report, the coronavirus crisis in China has forced pharmaceutical and chemical companies to shut their manufacturing units from mid-January.

In fact, the report quoted that most companies operating out of the affected regions have extended their shutdowns to mid-February. Fortunately, the healthcare crisis coincided with the Chinese New Year, due to which most API companies were well stocked in India.

However, after speaking with industry experts, the brokerage (Haitong) believes that these supplies are likely to be exhausted by mid-March.

First Published:Feb 25, 2020 12:20 PM IST