The markets have become volatile in afternoon trade and pharma stocks are under significant selling pressure. The key Nifty losers include the likes of Dr Reddy’s. The share price is down as much as 3% intra-day. Other pharma stocks like Lupin, Zydus, Ipca Labs, Ajanta Pharma, Torrent Pharma are all down anywhere between 2-3% each in intra-day trade. The Nifty Pharma Index is down over 1%. The BSE Healthcare Index is also down 1%.
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Here are three key reasons why pharma stocks are under pressure
Trump tariff threat
US President Donald Trump renewed tariff threats by calling April 2 as ‘Liberation Day for US Economy and reiterated that United States will impose reciprocal tariffs. Given the extent of India’s pharma exports to US, this has created a certain bit of uncertainty in the market. Trump said the US would impose tariffs on autos, pharmaceuticals and aluminum in “the very near future,” arguing that the U.S. would need all those products in the event of wars or other problems. However, the latest reports from Reuters indicate that “India is open to cutting tariffs on more than half of U.S. imports worth $23 billion.” According to the report, Reuters quoted Government sources and stated that in the first phase of the trade agreement between India-US, the big cuts are being planned with the aim to reduce possibility of reciprocal tariff.
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The tariff uncertainty has also led to worries about global economic slowdown. India is a key exporter of pharma products, especially generics. That means the prospect of a slowdown could hit the markets and trade prospects significantly. In FY24 India’s pharma exports were nearly $28 billion and this amount is set to increase well above $30 million by the end of FY25.
Valuation still a concern?
Several of the pharma counters are still seen trading at rater expensive valuations. Though the pharma stocks have come down significantly from 1-year highs, the investors are still looking for bargain buys. Moreover, the selling pressure has been further exacerbated by the lack of liquidity in the market and many investors forced to sell,
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