Equity

Nifty Pharma Snaps Six Session Winning Streak After Trump Reiterates Intention To Impose Reciprocal Tariffs

Following the announcement, the Nifty Pharma index snapped its six-session gaining streak and fell 1.57 per cent to an intraday low of 21,427.8. As many as 17 out of the 20 constituents of the index traded in the red at the time of writing

Nifty Pharma Snaps Six Session Winning Streak After Trump Reiterates Intention To Impose Reciprocal Tariffs
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Shares of domestic pharmaceutical companies declined in trade on March 25 following an announcement by US President Trump in which he reiterated his intention to impose reciprocal tariffs.

Following the announcement the Nifty Pharma index snapped its six session gaining streak and fell 1.57 per cent to an intraday low of 21,427.8. As many as 15 out of the 20 constituents of the index closed in the red. The index closed at the 21,542.5 level down by 1.05 per cent.

Which Stocks Declined Most

Nifty Pharma heavyweights such as Sun Pharmaceutical Industries Ltd, Cipla Ltd, Divi's Laboratories Ltd fell significantly on March 25. Shares of Sun Pharmaceutical Ltd declined over 1 per cent to hit an intraday low of Rs 1758.5 apiece on the NSE. The stock closed 1.33 per cent lower at Rs 1,761 apiece. Other heavyweights such as Cipla Ltd and Divi’s Laboratories Ltd also declined 1.18 per cent and 1.21 per cent at the close.

Dr Reddy’s Laboratories, Lupin Ltd and Zydus Lifesciences Ltd shares fell the most on March 25. Dr Reddy Laboratories’ shares closed lower by 3.04 per cent at Rs 1,173.5 on the NSE. Shares of Lupin Ltd also closed lower by 2.21 per cent at Rs 2,073 apiece on the NSE and Zydus Lifesciences Ltd closed lower by 1.81 per cent at Rs 907 apiece.

Even as most constituents of the index declined, five stocks bucked the trend. Shares of Abbott India Ltd, IPCA Laboratories Ltd, Mankind Pharma Ltd, Gland Pharma and JB Chemicals & Pharmaceuticals Ltd closed in the green up by 3.59 per cent.

Why Are Nifty Pharma Stocks Falling

On March 24, Trump hinted that he would announce tariffs on automobiles, aluminium and pharmaceuticals. The US President spoke to reporters at the White House and said that the US is likely to need automobiles, aluminium and pharmaceuticals in case the country faces problems, including wars.“We’ve been ripped off by every country,” Trump said.

Trump added that tariffs on the three goods are likely to generate "astronomical" revenue for the US. The statement comes amid concerns regarding a potential rise in inflation in the US caused by increasing tariffs. Earlier in February, Trump had announced he would impose 25 per cent tariffs on imports of automobiles, semiconductors and pharmaceuticals.

The imposition of tariffs is likely to impact domestic pharma companies as the United States is a key geography for India’s drugmakers. US also makes up a significant part of the revenue earned by the domestic pharma companies and the imposition of trade tariffs is likely to create headwinds for the domestic pharma business. Presently the US charges nearly zero duties on pharmaceutical imports from India. On the other hand, India imposes a 10 per cent trade tariff on pharmaceuticals from the US.

According to the India Brand Equity Foundation (IBEF), nearly 70 per cent of India’s exports are to North America and Europe as of 2023-24. The US is the largest importer of India’s pharmaceuticals and makes up 31.35 per cent of the country’s total pharma exports.

VK Vijayakumar, Chief Investment Strategist, Geojit Investments Ltd told Outlook Money that while there's no clarity regarding the extent of the tariffs, their imposition is likely to negatively impact the domestic pharmaceutical industry.

"There is no clarity on the nature or extent of reciprocal tariffs expected on April 2nd. Trump has threatened to impose tariffs on pharmaceuticals. If this materialises with say 25 per cent tariffs it will impact the Indian pharmaceuticals industry which exports about 31 per cent of its exports to the US," Vijayakumar said.

Vijayakumar also said that the US might make concessions for India when it comes to pharma as tariffs on pharmaceuticals from India could also increase inflation in the US.

"Negotiations are under way and a deal may be reached with concessions by India in areas like defence imports from the US. US also will be keen to avoid tariffs on pharmaceuticals from India since that will push up inflation in the US," Vijayakumar said.

Vijayakumar also mentioned that US and India might come up with a bilateral trade agreement prior to the imposition of tariffs.

"A Bilateral Trade Agreement between India and the US is likely before April 2nd with concessions from both sides. Trump’s recent message that he will be flexible on tariffs and may offer concessions to countries has raised hopes of an agreement. But we will have to wait and watch," Vijayakumar said.

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