Hospital stocks came under selling pressure after a media report suggested that the Government of India may soon introduce measures to regulate health insurance claims more tightly. The move is reportedly aimed at curbing overcharging of insured patients by private hospitals, raising concerns about potential profitability and capacity expansion constraints in the sector.
According to Jefferies, the report has triggered short-term investor caution. However, the brokerage has advised against reading too much into early-stage regulatory speculation.
“While the proposal could be a sentiment dampener in the near term, it’s too early to assess its eventual impact. Historically, similar headlines have led to temporary weakness but ultimately turned into buying opportunities,” Jefferies said in its latest note.
Jefferies believes that aggressive controls on pricing or reimbursements could hurt the pace of bed capacity additions, which are almost entirely led by private players in India. As healthcare infrastructure is still under-penetrated in many regions, the private sector’s investment remains crucial for expansion.
Despite the headline risk, the brokerage remains optimistic on the sector and retains Max Healthcare and Fortis Healthcare as its top picks.
Max Healthcare, in particular, has been a strong performer, supported by its leadership in the NCR region and higher ARPOB (Average Revenue Per Occupied Bed). Fortis is also seen benefiting from its improving margins, strong occupancies, and hospital network expansion plans.
“Regulatory noise is part and parcel of healthcare investing in India, but strong business fundamentals and long-term demand tailwinds remain intact,” Jefferies concluded.
