Pharmaceutical stocks came under pressure on Thursday, slipping up to 3% amid a broader stock market decline after the additional 25% tariffs imposed by the United States on Indian goods came into effect today, raising the total duties to 50%.
Ajanta Pharma, Gland Pharma, Lupin, Aurobindo Pharma, Sun Pharmaceutical Industries, Zydus Lifesciences, Divi’s Laboratories and Torrent Pharmaceuticals were among the top losers in the Nifty Pharma index, which shed over 1% during the session.
The selloff came even as the Indian pharmaceutical sector was spared from the immediate tariff hike, with the US recognising the importance of generic medicines in providing affordable healthcare. US President Donald Trump, however, has reiterated his intent to slash drug prices by as much as “1,400–1,500%” and threatened higher levies on pharma imports, a signal that is weighing on sector sentiment.
Analysts believe that the exemption from US tariffs is certainly a positive for the pharma sector, but it was largely anticipated and already priced in by the market sentiments, which is why it did not trigger any significant fresh buying.
“Attention has now shifted back to the sector’s underlying structural challenges such as persistent US pricing pressure, regulatory risks from FDA inspections, and margin volatility, which remain the key drivers of pharma valuations. As a result, we are witnessing profit booking, particularly in large and mid-cap names where valuations had become stretched against the backdrop of muted earnings growth, leaving little scope for near-term upside,” said Prashanth Tapse, Research Analyst, Senior Vice President of Research at Mehta Equities.
Tapse added that lingering compliance concerns and dependence on Chinese imports for key raw materials (KSMs and APIs) continue to pose risks, potentially pressuring margins if costs escalate.
Muted Q1 Results
Pharma companies reported tepid earnings in Q1FY26, with revenue growth of around 8%, and EBITDA and net profit rising 5.9% each. India business grew 9.7% year-on-year, supported by price hikes and steady volumes, but the US market remained subdued amid ongoing pricing pressure in generic Revlimid.
“The dip in the US was mainly on account of pricing pressure in gRevlimid and its sales may be lower in the next two quarters as well. Companies remain confident in their ability of passing on any cost escalation due to tariffs on generics in the US to their customers and some may also shift a portion of their manufacturing to the US,” ICICI Securities said in a note.
Following the Q1 results, ICICI Securities cut FY27E EPS estimates for 12 of the 23 pharma companies under its coverage by 1–19%, while upgrading recommendations on Pfizer, Alkem Laboratories and Aurobindo Pharma. Its top stock picks in the sector include Cipla, Sun Pharma, Piramal Pharma and Pfizer.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
