With an expectation of sustained improvement in earnings trajectory throughout the year 2020, CLSA has endorsed Sun Pharma, Dr. Reddy's and Aurobindo as companies to watch out for in the year 2020.

The foreign brokerage firm believes that the sustained growth in the earnings in the sector will be led by higher share of US generics market volume, traction in different prodcuts and resilient profitability in India. The Nifty Pharma index is down 9% in the last one year while the benchmark Nifty has gained 11.6% in the same period.

CLSA is bullish on Aurobindo as it has a strong presence and attractive risk to reward given a price to earnings valuation of 9.3 times FY21 EPS. Sun Pharma is good stock to buy due to its improving US fundamentals, led by monetisation of its speciality pipeline and No. 1 India rank. Similarly, Dr. Reddy’s too is a good investment considering an increase in focus on India, China and other emerging markets and lower dependence on marquee US products that had been a hindrance due to higher earning volatility.