Stock Market Today: The Nifty Pharma index gained 1.9% during the intraday trades on Wednesday. Alkem and Zydus stood among key gainers that led the rally
Nifty Pharma Index gains
The Nifty Pharma Index gained almost 2% during the intraday trade on Wednesday amid a relief rally in the Indian stock market.
The Nifty Pharma Index opened at 21,803.45 levels, higher than the previous day’s closing price of 21,753.50. It continued to gain further to an intraday high of 22,171.05, which meant gains of almost 2% over the previous day’s close. Alkem Laboratories, Zydus Lifesciences, Laurus Labs, and Abbott India were among the key gainers that led to the rise in the Nifty Pharma pack.
Should you buy or sell pharma stocks amid a relief rally?
US tariff uncertainty persists
The US market remains critical for many Indian pharma companies. Sun Pharmaceuticals, Lupin , Dr. Reddy’s, Aurobindo, Cipla, and many more derive a significant part of revenues from the US markets. Thus the danger of a 50% tax on pharmaceuticals looms, and this clearly poses a risk to the profitability of Indian pharmaceutical businesses, which rely on the US market for 30-50% of their sales.
Most of these US revenues, however, come from the generic drug segment.
Silver lining The silver lining remains as India remains cost-competitive compared to both the US and global peers, which should help mitigate some risks, said Ajit Banerjee, president and chief investment officer at Shriram Life Insurance.
The domestic Indian pharma market (50% of the Indian pharmaceutical market) will remain unaffected by tariffs.
Risks still outweigh
Within the US, the impact on the generic formulations market is still uncertain, though Indian players already operate on thin margins. Tariffs could increase the drug shortages by eliminating competition in a market where pricing pressures are already intense, which could be a positive for Indian companies over the mid- to long-term, highlighted Banerjee
While the recent executive order by the US Administration excludes the pharmaceutical sector from immediate tariff imposition. Any tariff action will depend on the outcome of the ongoing investigation under Section 232 of the Trade Expansion Act of 1962. Even if the India pharma tariff question is answered, Kotak Institutional expect the uncertainty to persist around whether the anticipated pharma tariffs (post the Section 232 investigation) would add to the country-specific one, definition of pharma/pharma products and then eventually how much of the tariffs are passed on and rolled back
Bannerjee believes the US can either bring manufacturing back home or reduce drug prices, but not both simultaneously. Even before tariffs are finalized, the uncertainty can lead to delays in order commitments and impact sector sentiment and stock price thereby.
Nifty Pharma valuations
The sector currently trades at a 1Y forward P/E of 29.7 times, above its 10-year average of 26.7x. We see tariff-induced volatility as a chance for investors to accumulate quality pharma stocks on dips, said Banerjee.
Technical Views on Pharma Index
Nifty Pharma has witnessed two weeks of selling pressure, especially after the recent U.S. tariff developments, as per analysts.
The Pharma Index was trading near a support level on the daily time frame, where a pause in the decline was expected in the coming days, potentially leading the index towards 21,998. The outlook remains negative as long as the index fails to sustain above 22,380. On the downside, a break below 21,240 could push the index further towards the 20,380–20,140 zone, as per Kunal Kamble, Sr. Technical Research Analyst at Bonanza *
Disclaimer: The views and recommendations above are those of individual analysts or brokerage companies, not Mint. We advise investors to check with certified experts before making any investment decisions.
