Concerns over weakening demand for Indian pharmaceutical (pharma) drugs in the US — their largest export market — have weighed heavily on investor sentiment this year.
While the Nifty 50 has gained 6.02 per cent year - to - date (as on September 15), the Nifty Pharma index has declined 5.18 per cent, National Stock Exchange data shows.
Several pharma stocks have taken steep hits: Natco Pharma plunged 38.48 per cent, Ipca Laboratories fell 22.6 per cent, Aurobindo Pharma dropped 17.57 per cent, and Sun Pharmaceutical Industries declined 15.1 per cent.
Other laggards include Lupin (down 13.18 per cent) and Dr Reddy’s Laboratories (down 6.3 per cent).
Although the long-term outlook for Indian pharma remains positive, analysts expect recovery to be slow and uneven.
Until there is clarity around US regulatory hurdles and persistent pricing pressures, experts advise a cautious, selective approach to investing.
According to Chokkalingam G, founder and head of research at Equinomics Research, the sector’s underperformance stems mainly from two factors: export realisations from the US coming under severe pressure, and the potential tariff threat from the US on Indian pharma products.
“While the 200 per cent tariff hinted at by US President Donald Trump is unlikely to materialise fully, pricing pressure on Indian pharma products in the US is almost certain,” he cautioned.
On top of that, slowing growth in US generics and intensifying regulatory scrutiny have also weighed on the sector.
Sun Pharma’s Halol and Mohali plants remain under US Food and Drug Administration observations, while Lupin and Cipla face stiff competition in key respiratory and chronic care drugs.
Meanwhile, the pace of abbreviated new drug applications has slowed, reflecting increasing selectivity by Indian drugmakers amid tightening margins.
Amid global headwinds, domestic demand has become the sector’s anchor.
According to a Nomura report, the India pharma market grew 8.7 per cent year-on-year in August — the best monthly performance in seven months — driven by strong growth in respiratory, cardiac, and antidiabetic therapies.
Pricing contributed 5.6 per cent to growth, while product launches added another 2.4 per cent.
Companies like Sun Pharma and Torrent have capitalised on this trend, delivering double-digit domestic growth of 13.7 per cent and 13.5 per cent, respectively, outpacing market averages last month.
“The domestic part of the sector is expected to outperform exports,” said Narendra Solanki, head of fundamental research at Anand Rathi.
“Chronic segments like respiratory, cardiac, and oncology continue to show healthy demand, supporting overall growth,” he added.
Against this backdrop, analysts urge investors to tread carefully, even as many pharma stocks now trade below their five-year valuation averages.
“There doesn’t seem to be a sector-wide trigger for a rebound yet, so moves will likely remain stock-specific with some technical bounces,” said Ravi Singh, senior vice-president of retail research at Religare Broking.
The sector, he added, hasn’t even played its usual defensive role this year.
“While valuations are turning more reasonable, selective exposure is still a better strategy than broad-based bets.”
Companies with strong domestic portfolios or niche product launches have held up relatively better.
“Glenmark has stood out with strong momentum, while Zydus, Torrent, and Abbott India look better placed.
"The rest may take longer to recover until headwinds like pricing and regulatory overhang ease,” Singh said.
Nuvama Institutional Equities notes that the renewed push for the BioSecure Act in the US, aimed at reducing reliance on Chinese biotech supply chains, could favour Indian CDMO players like Divi’s Laboratories, Neuland Labs, and Jubilant Pharmova.
Likewise, Chokkalingam advises focusing on domestic-heavy companies and those trading at less than 4x enterprise value to sales, especially those less exposed to US regulatory risks.
Beyond that, execution in high-margin segments like biosimilars and contract development and manufacturing organisation (CDMO) will be critical for rerating.
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