Omicron scare: Is it a good time to add diagnostics stocks to your portfolio?

The returned focus on diagnostics on Dalal Street comes at a time when the investor focus is seemingly shifting to pharma and healthcare as the market reacts to the emergence of the Omicron variant of COVID-19.

Headline indices hit a correction last seek amid a global sell-off triggered by the news of the detection of Omicron. Until then, both Sensex and Nifty50 indices had scaled a series of record highs over the past few months in a liquidity-driven run, with investors overlooking warnings on expensive valuations by foreign brokerages.

In an exclusive interview to CNBC-TV18, market guru Mark Mobius said investors are reacting to the news of Omicron when not many know about the new variant. He expects volatility in the market to ease as more is known about the Omicron.

He believes pharmaceutical and diagnostic stocks tend to perform better in such times. Mobius Capital would add pharma, diagnostic and technology stocks in such markets, said Founder Mobius.

Centrum Broking has initiated coverage on the country's diagnostics industry, with a 'buy' call each on Dr Lal PathLabs, Metropolis and Vijaya Diagnostics.

Among the recent debutants on Dalal Street, Vijaya Diagnostics shares are up 5.5 percent since a sanguine listing compared to their issue price of Rs 531.

The brokerage sees a massive opportunity in the industry, and expects consolidation to help sustain the high growth momentum for organised chains.

"We anticipate a faster shift to organised providers, given the quality setup, faster report turnaround, complex test availability and better customer experience. With their pan-India network, organised players also benefit from economies of scale and are able to provide better illness management for patients and better diagnosis for doctors," Centrum said in a report.

The coronavirus pandemic, according to Centrum, has led to a major push to wellness and overall healthcare penetration in India. Companies with wider networks are using asset-light models, third-party centres and home collection services to expand faster, it said.

Many stocks among the COVID beneficiaries have corrected from recent peaks and look attractive now from a long-term perspective, AK Prabhakar, Head of Research at IDBI Capital, told CNBCTV18.com.

Prabhakar has KIMS, Cipla, Cadila, Gland, Metropolis and Max Healthcare among his top picks now.

Most analysts believe the correction in the overall market after the strong rally since the COVID lows is healthy given the elevated levels of valuations.

Despite the recent dip, the Nifty50 benchmark is up more than 32 percent in the past one year. NSE's healthcare and pharma indices have risen 25 percent and 16 percent respectively.