Lupin, Biocon: Nifty Pharma gains 3% after US-India trade deal pact

Pharmaceutical stocks rallied in trade on Tuesday, February 3, 2026, after the United States (US) struck a trade deal with India, reducing the tariffs to 18 per cent from punitive 50 per cent earlier. 

 

At 9:28 AM, Nifty Pharma was trading 2.96 per cent higher, with Aurobindo Pharma and Wockhardt up  5 per cent, Divi’s Laboratories, Piramal Pharma, Dr. Reddy’s Laboratories, Sun Pharma, and Mankind Pharma rising over 3 per cent. 

 

Additionally, Glenmark Pharma, Zydus Lifesciences, Alkem Laboratories, Lupin, and Biocon are gaining over 2 per cent. In comparison, NSE Nifty was up 2.75 per cent at 25,778.45. 

 

Earnings and margin uplift

According to Axis Securities, the reduction in reciprocal taxes is incrementally positive for Indian pharmaceutical companies, particularly those with significant exposure to the US market, which accounts for 30–40 per cent of the sector's total revenue. The 700 basis points (bps) cut is expected to lower landed-cost pressure on exports and enhance price competitiveness in the structurally price-erosive US generics market.

 

On a quantified basis, the brokerage estimates that for a company with a 35 per cent US revenue mix, the tariff reduction could translate into a 100–200 bps improvement in consolidated Earnings before interest, tax, depreciation and amortisation (Ebitda) margins, depending on the product mix and the extent of cost pass-through. Given that a 100 bps margin expansion typically results in a 6–8 per cent uplift in earnings per share (EPS), Axis Securities believes this could lead to an 8–10 per cent EPS upside for US-focused generic players.  Check Stock Market LIVE Updates

Offsetting price erosion

The brokerage further noted that lower tariffs are expected to reduce US landed prices by 5–7 per cent, effectively helping offset the ongoing 3–5 per cent annual price erosion in the US generics market. This shift is likely to support volume traction, improve tender outcomes, and aid margin retention in specialty and complex product segments.

 

While Contract Development and Manufacturing Organisation (CDMO) and Active Pharmaceutical Ingredient (API) players are seen as indirect beneficiaries through improved order visibility and better contract economics, the impact on them may be relatively moderate due to the prevalence of cost-plus pricing structures.

Outlook and key beneficiaries

Overall, while reciprocal taxes remain above historical norms, the revision to 18 per cent materially softens the margin and earnings headwinds for Indian pharma exporters. This improves earnings visibility for FY27–28E and provides strong near-term valuation support for US-exposed names such as Dr. Reddy’s, Aurobindo Pharma, Lupin, Cipla, Sun Pharma, Zydus Lifesciences, and Divi’s Labs.

 

The trade deal was announced by US President Donald Trump on Monday via Truth Social following a phone call with Prime Minister Narendra Modi. The agreement comes more than five months after Washington imposed a 50 per cent tariff on several Indian exports, which included a 25 per cent punitive duty linked to India’s purchase of Russian crude oil.  Disclaimer: View and outlook shared belong to the respective brokerages/analysts and are not endorsed by Business Standard. Readers discretion is advised.