Top Sector Today: Pharma Stocks Rally on U.S. Drug Price Action; Granules, Mankind, Zydus Among Top Gainers

Pharma stocks lit up Dalal Street on Tuesday as President Donald Trump's statement on drug pricing sent mixed signals to global markets. While both benchmark indices experienced a sell-off, pharma stocks bucked the trend, becoming top gainer sector wise in the stock market today as investor optimism persisted over minor near-term impact on Indian generics medicines.

Pharma Stocks Rally Despite Nifty Decline

The Nifty Pharma index surged 2.3% intraday, outperforming the benchmark Nifty, which fell over 1.39% due to profit-booking in the market today. Most of the pharma stocks traded in green. Top gainers in the pharma sector included Granules India, up 41.9%, followed by Ajanta Pharma (3.39%), Ipca Labs (2.87%), Glenmark Pharma (2.76% each), Divi's Lab (2.42%) and Mankind Pharma (1.91%). Zydus Life (1.88%), etc., all were in gains.

While most sectors struggled in the stock market today, pharmaceutical stocks stood strong and gained, thanks to some big news coming from the U.S.

U.S. President Donald Trump signed an executive order which will potentially bring down the prices of medicines in America. He said it's unfair that U.S. citizens pay much more for the same drugs compared to people in other countries. To tackle this, he has given drug companies 30 days to show that they are working on lowering prices. If they don't, the U.S. government may take strict actions like putting tariffs on medicines, restricting imports/exports, or even selling drugs at international rates.

Why Are Indian Pharma Stocks Rising?

Market experts believe that the latest U.S. drug pricing order by President Trump won't hurt Indian pharma companies in the short term. As per the data, India is one of the top suppliers of low-cost generic medicines to the world. In fact, India's strong position as a global drug supplier continues to make its pharma stocks a safe and smart bet in uncertain times. This eased investor concerns and led to buying interest in Indian pharma companies, especially those that sell a lot of medicines in the U.S.

As per the Kotak institutional equities report, " For the pharma companies we track, the U.S. contributes anywhere between 5% to 65% of their overall earnings before interest and tax (EBITDA). Among them, Sun Pharma (SUNP) is the only one with a strong branded drug business in the U.S., especially in speciality medicines. While nothing immediate is changing, in the long term, any U.S. policy shift could impact Sun Pharma's future speciality drug pipeline, which the company is working hard to expand beyond generics."

Pharma Stocks Target Prices and Analyst Recommendations

As per the latest report by Antique, analyst views on pharma stocks remain mixed. Alkem Labs has been rated 'Hold' with a target price of Rs. 4,670 against the current market price (CMP) of Rs. 4,958. Alembic Pharma is a 'Buy' with a strong upside potential from its CMP of Rs. 852 to a target of Rs. 1,411. Cipla, Divi's Laboratories, and Dr. Reddy's have received 'Sell' calls, with target prices of Rs.1,204, Rs. 4,150, and Rs. 1,158, respectively, all lower than their current levels. On the positive side, Lupin and Mankind Pharma were given 'Buy' recommendations, with Lupin seen moving from Rs. 1,934 to Rs. 2,259, and Mankind Pharma maintaining a buy stance at Rs. 2,520.

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author, nor GoodReturns. The author, nor the brokerage firm nor GoodReturns would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.