Hospital stocks slid 5‑7% in early trade as the Supreme Court flagged high drug markups. NewPARA Elara Securities' Bino Pathiparampil estimates the margin cap’s effect on earnings per share will not exceed 5‑10%, citing a current return on capital of about 20% across the sector.
The sector saw a sharp sell‑off after a ₹27,000 cancer drug price was criticized, prompting a 16% margin cap proposal that regulators are now considering.
Stocks have corrected 6% after a 1‑2 year decline from six‑month peaks, boosting price‑to‑earnings multiples to 18×—below the 22× average for diversified services.
Despite regulatory concerns, Pathiparampil sees no drastic profit hits; he recommends that medium‑term investors consider buying at current levels as the margin cap risk is unlikely to dent earnings significantly.