I agree to many points of @Dhruva1705
At any point of time, the market has good news and bad news. When the market is booming, the media has a tendency to highlight positive factor, completely ignoring negative factors. However, when the overall market is bad, media has a tendency to highlight severe or extreme scenarios about the overall market. Believe it or not media influence largely on the short term investment sentiments after all majority of the investor/MF managers read the same newspaper and watch the same channel.
Someone has said, “Man is not a rational animal but rationalising animal”. One could question if their doomsday reports about pharma sector are rational stories (probably are) or the media is rationalising the correction in stock prices for the major pharma stock and bring in stories to support the case.
Thinking about question – "How much market know about the stock or sector?", and I would argue that market often gets it wrong when it comes to knowing. For example, due to demonization, there was a fear in the market that there will be many of default for the loan against property, which resulted in prices correcting considerably for some bank exposed to this sector. Fast forward 6 months, there is not much talk about it. In fact, some of the same beaten down stocks have appreciated more than 50% (or doubled e.f DCB Bank).
Coming back to Pharma, I think is an open secret that a lot of stocks are down 40/50 %, their PE has contracted much and coming considerably. Based on the commentary from Sun Pharma, they are looking for de-growth. However, I am not sure if it structural in nature for the industry or it is Sun Pharma specific.
In my view, some of the pharma stock coming down and offering a good valuation. I am not sure if they go down further, probably yes, but based on their current prices, a lot of negatives is priced in.
Many of pharma companies (Dr Reddy, Sun Pharma, Divis Laboratories) have good competitive advantage, in term of R&D and processes. In the short term, US FDA has shattered their high growth aspiration, but the same US FDA could become their competitive position. It is not easy to get approval from US FDA, so the company who has approved plant could still command higher prices for their product and it is not easy to get new plant US FDA approved. Even though the US buyer market is consolidating, if there are fewer suppliers in the market, it is not a one-way street for the supplier.
Note- I have a small position in some of the stock I have mentioned above.