Stock Market Today: Indian pharma stocks faced significant selling pressure in today’s session, February 10, driven by weak earnings in select companies and fears that former U.S. President Donald Trump could introduce a universal trade tariff of at least 10% on all imports, potentially affecting pharmaceutical exports.
As a result, 19 out of 20 constituents of the Nifty Pharma index declined, with Alkem Laboratories and Ipca Laboratories emerging as the top losers, plunging 7% and 4.1%, respectively. The index dropped 2.12% during the session.
The Nifty Pharma index ended January with a 9% decline, as weak earnings from major Indian pharmaceutical companies prompted brokerages to lower their valuation multiples. Additionally, the uncertainty surrounding potential U.S. tariffs further weighed on investor sentiment, with stretched valuations in some stocks also playing a role in the sell-off.
Several leading Indian pharmaceutical companies, such as Cipla, Sun Pharma, Dr. Reddy’s, Lupin, and Aurobindo Pharma, have a substantial R&D and manufacturing presence in the US, along with significant revenue contributions from the North American region.
The country’s drugs and pharma exports increased by 9.67% year-on-year to USD 27.9 billion in FY 24, even as the total exports dipped by 3% in the last fiscal year, as per the commerce data.
Since assuming office, Trump has been actively pushing his “Make America Great Again” agenda, focusing on protecting American businesses and citizens. His policies have prioritized strengthening domestic manufacturing, reducing reliance on foreign imports, and enforcing stricter trade practices to safeguard American industries.
Pharma stocks underperform during Trump 1.0
During Trump’s first term in office, the Indian pharmaceutical sector struggled with challenges including consolidation in US distribution channels, regulatory challenges from the FDA concerning key plants, a lack of major product approvals, price control measures, and a ban on FDCs in India.
Nifty Pharma delivered a close to 20% return during Trump’s first term (Jan-2017 to Jan-2021) vs. Nifty 50’s absolute return of 80%. Large-cap stocks such as Cipla tumbled 16% between 2017 and 2019, while those of Sun Pharma and Lupin corrected by 31% and 49% during the same period, as these companies had significant exposure to the US markets and were directly impacted by the regulatory and policy changes.
