Healthcare Stocks in India

What are healthcare stocks?

Healthcare stocks include pharmaceutical and biotechnology companies, hospital chains, diagnostic laboratories and makers of medical equipment and supplies. India is often called the pharmacy of the world because it supplies a large share of the world's generic medicines - copies of drugs whose patents have expired - including to the United States.

Within the sector, business models differ widely. Some pharma companies earn most of their revenue from the US generics market, others from branded medicines sold in India, and others from contract manufacturing or research services (CDMO and CRO). Hospital and diagnostic companies depend on patients in India and grow as more people can afford private care and as health insurance spreads.

What moves healthcare stocks

US FDA inspections

Plants that sell to the US are inspected by the US Food and Drug Administration. An observation (Form 483), a warning letter or an import alert can stop shipments from a plant and hit the share price.

New drug approvals and launches

Approvals for new generics - especially complex or first-to-market ones - drive growth in the US business.

US price erosion

Prices of generic drugs in the US tend to fall over time as more competitors enter.

Domestic price controls

In India, prices of essential medicines are regulated, which limits how much companies can raise them.

Healthcare demand in India

Rising incomes, insurance coverage and chronic conditions such as diabetes and heart disease drive growth for hospitals and domestic pharma.

What to check before investing in healthcare stocks

Revenue mix

How much comes from the US, India, other export markets and contract manufacturing - each has different risks.

Regulatory track record

A history of clean FDA inspections is valuable; repeated warning letters are a red flag.

R&D pipeline

The drugs a company is developing or has filed for approval, and what it spends on research as a share of revenue.

ARPOB and occupancy (for hospitals)

Average revenue per occupied bed and the share of beds filled - the key measures of a hospital's performance.

Risks to know

For pharma companies the biggest single risk is regulatory: an adverse FDA action on a major plant can remove a large part of revenue for years. Price erosion in the US, patent litigation and price controls in India are others. Hospitals need heavy investment in new beds, which takes years to become profitable.

How to invest in healthcare stocks

1. 1

   Open a demat and trading account

   A demat account holds your shares electronically; a trading account lets you buy and sell them. With GoPocket you can open both online in a few minutes with your PAN, Aadhaar and bank details.

2. 2

   Add money

   Transfer funds to your trading account by UPI or net banking.

3. 3

   Research the company

   Pick a company from the list above and open its page to see its share price chart, financial performance and shareholding before you decide. Compare it with other healthcare stocks on business quality, debt, growth and valuation.

4. 4

   Place your order

   Search for the stock in the GoPocket app or web platform, choose the quantity, and place a delivery order to hold the shares in your demat account. A limit order lets you set the most you are willing to pay.

5. 5

   Track and review

   Follow the company's quarterly results and news. Spreading your money across several companies and sectors reduces the damage if one investment goes wrong.

Terms used on this page

LTP

Last traded price - the price at which the stock last changed hands. The figure below it is the change from the previous day's close.

Market cap

Market capitalisation: share price multiplied by the number of shares issued. It measures a company's size in the market and is shown here in rupees crore (1 crore = 1,00,00,000).

Cap band

Whether a company is large, mid, small or micro cap, based on its market capitalisation. Larger companies tend to be less volatile.

Sector and industry

The NSE groups companies into broad sectors (such as Financial Services) and narrower industries within them (such as Banks), based on what they mainly do.

Trading graph

How the share price has moved during the latest trading session, from the 9:15 open to the 3:30 close. The dashed line is the previous day's closing price.