Aurobindo Pharma, Lupin, Cipla: Pharma stocks slide as tariff concerns loom; Nifty Pharma down over 1.5%

Shares of pharma companies tumbled over 3% on Tuesday, July 8, as investors became jittery as the US administration started sending tariff letters to several countries.

The US has extended the suspension of its April 2 reciprocal tariffs until August 1, a move that provides relief to Indian exporters and additional time for New Delhi and Washington to resolve pending issues to finalise an interim trade deal.

Meanwhile, India is negotiating a trade pact with the US and is close to making a trade deal soon, Trump said.

On Monday, President Trump set a 25% tax on goods imported from Japan and South Korea, as well as new tariff rates on a dozen other nations.

Bangladesh, Indonesia, Japan, South Korea, Malaysia, Thailand, South Africa, Bosnia and Herzegovina, Cambodia, Kazakhstan, Laos, Serbia, and Tunisia are among the countries that received letters signed by US President Donald Trump.

This led to the decline in pharma stocks on Tuesday. At the time of writing the article, Nifty Pharma was down 1.15%. The index had touched an intraday low of 21,987.65, tumbling 1.63%.

Aurobindo Pharma (-3.42%), Lupin (-2.49%), Granules Pharma (-2.74%), Zydus Life (-2.29%), and Dr. Reddy’s (-2.22%) were among the top losers on the index.

Furthermore, shares of Alkem Pharma (-1.8%), Cipla (-1.32%), Glenmark (-1.24%), Abbott India (-1.23%), and Ajanta Pharma (-1.22%) were also trading lower.

Shares of Biocon (-0.90%), Torrent Pharma (-0.88%), Sun Pharma (0.86%), Laurus Lab (-0.64%), and JB Chemicals & Pharmaceuticals (-0.48%) slipped on Tuesday.

The US accounts for a third of India's overall pharma exports. Indian pharmaceutical companies supply a substantial proportion of drugs to US residents, with four out of ten of all prescriptions filled in the US in 2022 being supplied by Indian companies.

This is leading to the nervousness among the investors ahead of the trade deal.

According to a news report, analysts feel that Trump's tariff may in turn benefit Indian pharma companies. 

Global brokerage Macquarie has downgraded key Indian pharmaceutical companies, citing margin concerns and weak global visibility.

The brokerage expects Dr. Reddy’s and Aurobindo Pharma to face sustained headwinds in the US generics market, which may weigh on earnings growth.