Cipla, Sun Pharma, Lupin Shares Tumble Up To 5 Per Cent As Indian Markets Swallow Trump’s Bitter Pill For Pharma

Nifty Pharma Shares Decline: Shares of domestic pharmaceutical companies tumbled in trade on April 4 following an update shared by US President Donald Trump regarding the imposition of tariffs on the sector. The Nifty Pharma index also declined over 6 per cent to an intraday low level of 20,089.45 before closing lower by 4.03 per cent.

As per reports which cited a statement given by US President Donald Trump on Air Force One, the US is likely to impose tariffs on pharma at levels ‘which have not been seen before’. He added that the US is looking at pharma as a separate category and that tariffs will be announced in the near future for the sector.

"Pharma tariffs are going to come in at levels you haven't really seen before. We are looking at pharmaceuticals as a separate category. We will be announcing that sometime in the near future, and not too distant future. It's under review right now," Trump said.

Nifty Pharma Constituents Decline

Notably, the Nifty Pharma index declined the most among all major sectoral indices following the announcement. As many as 18 out of the 20 constituents of the Nifty Pharma index closed in the red, and only two constituents of the index traded in the green at the close. Shares of Mankind Pharma and Torrent Pharma closed higher by up to 1.91 per cent on the NSE.

On the other hand, shares of IPCA Laboratories Ltd declined the most among the constituents of the Nifty Pharma index. The stock fell over 9 per cent to trade at an intraday low of Rs 1358.5 apiece on the NSE. Other pharma stocks which declined significantly included Laurus Labs, Granules India and Aurobindo Pharma which closed lower by as much as 7.21 per cent on the NSE. Lupin, Gland Pharma, Natco Pharma and Cipla also declined in trade today by as much as 6 per cent.

Notably, the correction seen in the top constituents of the Nifty Pharma index by weightage dragged it lower. Shares of Sun Pharmaceutical Industries Ltd, Cipla Ltd, Divi's Laboratories Ltd. and Dr. Reddy's Laboratories Ltd. which collectively make up 54.75 per cent weightage of the index traded lower by as much as 5.29 per cent.

Indian Investors Swallow Trump’s Bitter Pill For Pharma

The Nifty Pharma index witnessed a two-session gaining spree between April 2 and April 4 as the index climbed over 3 per cent to close at 21423.55 levels following the tariff announcement. Pharma stocks gained on the expectation that the sector would remain exempt from the tariff imposition.

However, with Trump’s announcement regarding the imposition of ‘unprecedented tariffs’ pharma stocks have completely erased all the gains made in the two sessions. The tariffs on domestic pharmaceutical companies become significant since the US is a key geography for India’s pharma exports.

As per, the think-tank, India Brand Equity Foundation’s report nearly 70 per cent of India’s exports are to regulated markets such as North America and Europe with the US being a top destination for Indian pharma in 2023-24. The US is the largest importer of Indian pharma goods with a share of 31.35 per cent during 2023-24.

Bhavya Shah the Head of Research at Wallfort PMS told Outlook Money that the gains made by pharmaceutical stocks have been erased in today's session due to indications of the inclusion of pharma in tariffs.

"Indian pharmaceutical stocks have experienced high volatility due to Trump's recent announcement on potential tariffs in the sector. Initial euphoria, driven by the sector being left out of tariff imposition, has evaporated due to late indications of possible inclusion in tariff measures," Shah said.

Shah added that the tariffs will be measured on the basis of the sensitivity for the sector. Companies with more exposure to the US market are likely to get more affected.

"In our view, the tariffs will be measured due to the sensitiveness of the sector for U.S. consumers. Naturally, the companies with significant exposure and more direct competitors in the US market are likely to face bigger brunt," Shah said.