Hospital stocks extend losses as drug-pricing regulation concerns linger; Apollo, Max among top Nifty…

New business data points to the fact that Hospital stocks remained under pressure for a second straight session on Thursday as market participants continued to assess the potential impact of tighter regulation of medicine mark-ups at private hospitals following the Supreme Court's observations earlier the current week.

Apollo Hospitals Enterprise shares declined 2.3 percent to Rs 7,978 in early session, while Max Healthcare Institute declined 2.2 percent to Rs 909.05. Apollo Hospitals and Max Healthcare were additionally among the top losers on the Nifty 50.

Fortis Healthcare was down 2.2 percent at Rs 753, while Krishna Institute of Medical Sciences (KIMS) eased 2.8 percent to Rs 725.85. Aster DM Quality Care declined 1.4 percent to Rs 687.60, while Yatharth Hospital & Trauma Care Services was relatively resilient, down 0.3 percent at Rs 1,029.10.

The declines came even as the broader healthcare space saw relatively modest losses. The Nifty Healthcare index was down 0.4 percent and the Nifty Pharma index eased 0.1 percent in early session. At 9:16 am, the Sensex was down 120 points, or 0.17 percent, at 72,360, while the Nifty declined 56 points, or 0.25 percent, to 22,564. Market breadth was weak, with 911 shares advancing against 1,474 declining.

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Supreme Court observations keep hospitals under pressure

Hospital stocks had fallen sharply in the previous session after the Supreme Court expressed concern over steep mark-ups on medicines sold by hospitals and questioned whether a uniform 16 percent margin could be applied to medicines. The court cited the example of a cancer drug with an MRP of Rs 27,000 despite a price to retailers of Rs 2,700 and additionally boosted concerns around hospitals requiring patients to purchase medicines through their in-house pharmacies.

The concerns triggered a broad sell-off in hospital shares on Wednesday. Apollo Hospitals ended 6.6 percent softer, Fortis Healthcare lost 6.9 percent, Max Healthcare declined 5.8 percent and Aster DM Quality Care declined 5.2 percent. Yatharth Hospital eased 7.6 percent, while KIMS lost 3.2 percent.

The Nifty Healthcare and Nifty Pharma indices had declined 2.6 percent and 1.8 percent, respectively, in the previous session.

That stated, research firms highlighted that the eventual financial impact stays uncertain and would depend on the scope of any regulatory intervention.

Jefferies estimated that medicines and consumables account for around 15-20 percent of hospital topline and pegged the potential EBITDA impact at 2-5 percent under various price-cap scenarios, assuming hospitals are unable to pass on the impact. The brokerage maintained its positive view on the sector, adding that previous regulatory overhangs had typically led to periods of stock consolidation.

HSBC additionally flagged pricing intervention as a key concern for hospital stocks, adding that the on-ground impact stays uncertain and that further regulatory developments need to be monitored. The offering is yet to translate into a binding price-control order.