HMPV Outbreak: Are Healthcare And Hospital Stocks The New Safe Haven For Investors?

After combating the COVID-19 pandemic, India is ready to face another HMPV virus epidemic. The public was reassured by the Union Health Ministry that India is equipped to manage respiratory ailments. The World Health Organisation was also asked to provide updates on the situation in China, where there has been a recent surge in many respiratory infections. Investors are worried about the HMPV epidemic in China because India has reported seven cases in total so far. Hospital capacity cannot be increased by such short-term outbreaks.

Since it takes years to build new hospitals if similar outbreaks continue annually, hospitals will ultimately expand their capacity, but nothing will happen right away. Hospitals will also be closely monitored by the government during these periods, therefore several compliance or regulatory requirements may be placed on them. Hospitals and diagnostic firms will experience a brief uptick, but doctors and health ministers are saying that it's not a severe issue because the symptoms are comparable to a cold or cough, and these viruses have been around in India, especially during the winter.

HMPV Cases Spike: Are Hospital Stocks The New Safe Haven For Investors?

Actually, hospital/healthcare stocks have always been a safe haven for investors as healthcare is a non-cyclical business, meaning this sector performs better even in an economic downturn. The healthcare sector in India is witnessing steady growth due to increasing medical insurance penetration, lifestyle-related diseases, and a greater focus on health & wellness, as per Mr Girish Kumar, Research Analyst at Share India Securities.

Nikhil Gangil, Smallcase Manager, Founder of Intrinsic Value Equity Research said even if we ignore the fact that it is immoral to bet on people's misery, these short-term chaos are never good for industry and stock prices. Organized players never make money from such chaos.

"Such short term outbreaks can not increase the capacity of the hospitals, Building new hospitals takes years so if such outbreaks keep happening every year, Hospitals will eventually increase their capacity, but nothing comes out of it immediately. When growth comes over the years, it is helpful like what happened in the Green energy sector. They had targets but those targets were yearly targets, not weekly or monthly," said Nikhil Gangil.

"Such times hospitals will also be in the close radar of govt. so many compliance or regulatory burdens (Like free treatment) can be imposed. The only people who make money in Chaos and outbreaks are Crooks, Agents and Dalal people. In the last outbreak also the people who sold Oxygen and hospital beds for 10X prices were the only people who made money. All organized players, Be it hospitals or Pharma never made any substantial money," commented Nikhil Gangil.

Will HMPV Outbreak Drive Short-Term Growth In Healthcare and Hospital Stocks?

Actually, the Healthcare/hospital sector is already in growth mode with an average 3-year-ROE greater than 21% and a 3-year average profitability is 30%. If HMPV outbreaks this will surely provide tailwinds to the already buyout sector & these numbers will be reflected in coming quarterly results, said Girish Kumar.

HMPV Outbreak: How It Could Impact The Healthcare Sector and Hospital Stocks?

In the case of HMPV outbreaks, hospitals could see higher admissions for respiratory-related cases, ICUs, and emergency services. Diagnostics and laboratory businesses may experience a surge in testing volumes for viral infections. Pharma companies specializing in respiratory drugs, antivirals, and related treatments are likely to benefit. Hospital and pharma stocks tend to see speculative trading and increased volume during health crises. Investors focusing on quarterly earnings growth could drive the stock prices higher in the short term, explained Mr. Girish Kumar, Research Analyst at Share India Securities.

"Amid new HMPV virus headlines more than pharma stocks, traders should focus on pathology lab and Diagnostic stocks like Metropolis Healthcare and Dr. Lal PathLabs which would get more highlighted when it comes to business. As India Reports Two Cases, in HMPV symptoms investors are concerned about the outbreak in China. With two cases in India, it is too early to take this too seriously. We believe India is well prepared to fight such an outbreak after COVID 19 control. The Union Health Ministry assured the public that India is well-prepared to handle respiratory illnesses. It also requested updates from the World Health Organization regarding the situation in China, where multiple respiratory viruses have recently spiked," said Prashanth Tapse, Senior VP Research Analyst at Mehta Equities Ltd.

Stocks To Watch

Hospitals: Medanta Hospital, Max Healthcare, Fortis Healthcare.
Diagnostics: Dr. Lal PathLabs, Metropolis Healthcare.
Pharma: Cipla, Glenmark, Sun Pharma.
Healthcare Ancillaries: Poly Medicure, Shalby.

Stocks to invest in HMPV trend

As per Prashanth Tapse, technically Metropolis Healthcare (Cmp Rs 2035) looks good with a Stop Loss Below Rs 1980 Target Rs 2100-2200 & Dr. Lal PathLabs (Cmp Rs 2980) with a Stop Loss Below Rs 2800 Target Rs 3200/3300.

Apollo Hospitals looks bearish on the Daily charts with strong resistance at 7466. A daily close below support of 7290 could lead to a target of 7000 in the near term, said A R Ramachandran, Independent Research Analyst.

Conclusion

The hospital industry will continue to grow and hospital stocks will also make money but thinking that such outbreaks or some urgent matters can lead to it will be naïve thinking.
For the short term, the hospital and diagnostic companies will see some rally but as the doctors and health ministers are mentioning it's not a serious matter, the symptoms are similar to cough and cold, and these types of viruses have existed in India specifically in the winter season.

As per the research of Fisdom, the first cases of the HMPV virus have recently been identified in India. Its emergence coincides with the ongoing flu season, making it challenging to determine the exact extent of its spread. However, the Union Ministry of Health has assured the public of its preparedness to manage respiratory illnesses effectively.

"This is a developing situation. In the absence of further developments, it may be premature to draw conclusions about specific sectors based solely on this news. That said, seasonal flu trends often benefit certain segments of the broader healthcare sector, including diagnostics, generic pharmaceuticals, and healthcare service providers," the research further highlighted.

Even though HMPV cases are starting to rise in India, the symptoms and mortality rate seem lesser as compared to COVID 19 and hence stock markets across the globe might not be impacted in a major way.

Disclaimer

The recommendations made above are by market analysts and are not advised by either the author, nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.