How to play Ranbaxy now?

New Delhi: Ranbaxy has been in the news for all the wrong reasons and it has suffered yet another setback as a US court on Friday upheld the validity of two key US patents on Pfizer's Lipitor. Analysts believe its stock could be approaching its bottom soon, and one should look at it with a long-term view.

Ranbaxy suffered yet another setback as a US court on Friday upheld the validity of two key US patents on Pfizer's Lipitor. Ranbaxy had hoped to introduce a generic version of the medicine. Pfizer will now have patent protection on the world's best-selling anti-cholesteral drug through June 2011.

President of Ranbaxy Malvinder Singh believes that the company remains undeterred to bring affordable generics globally to various markets. He says they will appeal the decision and take it to the Federal Circuit.

Analysts believe that one needs to be cautious with this stock and either look at it from a long-term perspective or stay away from it.

Technical analyst, Deepak Mohoni says, "Predicting its support level is a tough call. It could be just about anywhere when the panic stops. When there is a strong market, there will be panic selling in the stock in the beginning and that usually results in an intra-day bottom."

Technical analyst, Sudarshan Sukhani says, "This decision may have stemmed the breeding for now, but we have talked about Ranbaxy earlier also. Ranbaxy needs a lot of space building before we can say that the down move is in a bear trend. The bear trend will only end if it has a strong base and then breaks up, and that has not happened yet."

He adds that, while traders can do some trading on it by buying it on a sharp decline and selling on a small rally, investors have to look at the very long term, or stay away from it.

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Head of Research at IDBI Capital Market, Shahina Mukadam believes that the current ruling is a negative development for Ranbaxy and one should look to re-enter it only below Rs 330 levels.

She says, "This is a very negative development for Ranbaxy. But I don’t think in terms of earnings this downgrades it, because I had not factored any upside in my earnings estimates for 2008 also, even if this was a positive judgement. So I don’t think too many analysts have done that. At the same time there is some amount of sentiment upside, which has been factored into the current levels."

She adds that, inspite of the 7% fall; there is only a Rs 30 to 40 downside that is possible in it now.

Further she says, "I would advise investors to be very cautious even now and look to re-enter it only below Rs 330 levels."

Vibhav Kapoor of IL&FS Investsmart says, "There has been a lot of negative news flow for Ranbaxy for the past several months, its performance has also not been good, so I guess anything could happen with it. The Lipitor judgement may be the last nail in the coffin. So all the bad news has been coming out and we might actually be close to a bottom in Ranbaxy in a couple of days from now."