Alkem Labs, Ipca, Divi's: Three reasons why pharma stocks are falling today

The Nifty Pharma index was under pressure on Monday, February 10, 2025, as it slipped as much as 2 per cent to hit an intraday low of 21,634.75 levels.

 

According to analysts, several factors have contributed to the drop in the Nifty Pharma index, including fears surrounding Trump’s tariffs, desperate selling due to margin calls, and the stretched valuation of certain stocks.

 

Of 20 stocks in the Nifty Pharma index, 19 were trading in the negative territory at the time of publishing this report. Among the hardest hit, Alkem Labs shares saw a decline of 7 per cent, while Ipca and Laurus Labs dropped by over 4 per cent and 3 per cent, respectively. Other stocks like Granules fell by 3 per cent, Divi Labs 3 per cent, and Aurobindo Pharma 2.5 per cent. Biocon, Zydus Life, Ajanta Pharma, Lupin, and Gland Pharma also saw a drop in the range of 2-2.5 per cent.

 

Meanwhile, stocks such as Natco, Dr. Reddy's, Cipla, Mankind, Torrent, Sun Pharma, Abbott, and Glenmark slipped in the range of 1-2 per cent.

 

JB Chemicals and Pharma was an exception, seeing a slight gain of 0.4 per cent despite the weak market conditions.

 

Here are the top three reasons behind the fall in the Nifty Pharma index:

 

Trump tariff fears

 

Analysts believe that the uncertainty surrounding Trump policies is pressuring pharma companies. If Trump imposed tariffs, analysts believe, some Indian pharma companies could be severely affected, especially with rising raw material costs, particularly Active Pharmaceutical Ingredients (APIs). This would lead to higher production costs, reduced margins, and a loss of competitiveness in exports.

 

Chokkalingam G, founder & head of research at Equinomic Research, said that the decline in the Nifty Pharma index was driven by fears of possible protectionist policies from Trump that could negatively impact Indian pharma exports.

 

Stretched valuations

 

Chokkalingam also highlighted that the stretched valuations of certain stocks, combined with a major reduction in overall market capitalisation in recent months, have added pressure to pharma stocks. This has resulted in tighter liquidity, leading to selling pressure even on reasonably valued pharma stocks.

 

Margin calls leading to desperate selling

 

Independent analyst Ambareesh Baliga pointed out that many investors are also selling their holdings desperately due to margin calls. 

 

A margin call occurs when the value of an investor's holdings falls below the minimum required by their broker. In response, investors are forced to sell assets in order to meet the margin requirements. This forced liquidation to prevent further losses, analysts believe, has contributed to the broader downturn in the Nifty Pharma index.