Nifty Pharma down 1.5%: Granules, Biocon lead with over 2% fall; Here's why

Pharma stocks fell after Trump said tariffs will be imposed within a week, rising up to 250 per cent in 12-18 months

Shares of Indian pharmaceutical companies fell on Wednesday after US President Donald Trump hinted at as much as a 250 per cent tariff rate in 12 to 18 months. 

 

The Nifty Pharma index declined as much as 1.4 per cent on Wednesday, dragged down by losses in Granules India, Laurus Labs, and Biocon, each falling over 2 per cent. Gland Pharma was the only stock in the index to trade in green after announcing its first-quarter results. 

 

As of 11:05 AM, the pharma index was down 1.2 per cent, compared to a 0.37 per cent decline in the benchmark Nifty50 index. Divi's Laboratories (down 2.07 per cent), Glenmark Pharma (down 2 per cent), Abbott India (down 1.97 per cent), Zudys Lifesciences (down 1.7 per cent), and Mankind Pharma (down 1.34 per cent) were also dragging the index. 

 

 

Gland Pharma stock jumped over 6 per cent intraday after it reported a strong double-digit rise in earnings after four consecutive quarters of decline.  Track LIVE Stock Market Updates Here

Why did pharma stocks fall?

The risk-off sentiment in Indian stocks deepened after US President Donald Trump's decision to raise tariffs on India "substantially in the next 24 hours" over its continued imports of Russian oil. He also said that tariffs on semiconductors will be set in the coming week. 

 

Specifically on pharma, Trump said that he will levy tariffs within the next week and added that these products will see their tariff rate jump as high as 250 per cent within 12 to 18 months. 

 

This comes after the US President imposed a 25 per cent tariff on Indian goods last week, which in itself will be a pain point to companies' bottom line. If pharmaceutical exports from India to the US come under a 25 per cent tariff bracket, the impact on earnings before interest, tax, depreciation and amortisation (Ebitda) could be around 5 per cent, according to analysts.  

 

Kotak Institutional Equities said that assuming a 25 per cent tariff on Indian pharma firms and baking in a nil pass-through, there could be a 0-27 per cent earnings per share (EPS) impact on generic drug exporters.

 

High tariffs in pharma, particularly generics, are unlikely to sustain as those will drive higher outlays for US patients and drug shortages. Supply risks could be partially mitigated if the US comes out with an incentive scheme like India’s production-linked incentive (PLI) scheme.