India's Pharma sector falters in H1 2025; index falls over 6% becoming the second worst-performing sector

Mint

2 days ago

India's pharmaceutical sector has come under significant pressure in 2025, with the Nifty Pharma index falling more than 6 percent during the first half of the year. In stark contrast, the broader Nifty 50 index gained nearly 8 percent over the same period. Investor sentiment has turned sharply bearish amid a series of domestic and global concerns ranging from export tariffs to macroeconomic uncertainty.
The downturn has been broad-based. Natco Pharma suffered the steepest decline, plunging around 34 percent. IPCA Labs dropped over 20 percent, while Aurobindo Pharma, Lupin, Granules India, Mankind Pharma, Ajanta Pharma, and Alkem Labs lost between 12–20 percent. Even stalwarts such as Biocon, Cipla, Dr Reddy's, JB Chemicals, and Sun Pharma saw setbacks of 1–10 percent.
Amid the decline, a few companies have stood out. Laurus Labs recorded a 19 percent gain, Abbott India rose 16 percent, Divi's Labs climbed 10 percent, and Glenmark Pharma increased by 8.6 percent. Torrent Pharma and Zydus Life also managed modest gains.
The sector's weakening fortunes are linked to several concerns. Large-scale foreign institutional investor (FII) exits, particularly from export-sensitive industries, have weighed heavily on pharma stocks. Macro risks such as sluggish global growth, higher interest rates, and the ongoing US–China trade tensions have exacerbated the situation.
Market anxiety escalated after former US President Trump's announcements—first in April and again in June—hinting at enforcing pharmaceutical tariffs of up to 25 percent. Such measures would severely impact Indian drugmakers, which export up to 40 percent of their generics and specialty medicines to the US.
Nuvama Institutional Equities acknowledged investor caution surrounding large-cap pharma, particularly due to US policy threats and product-mix exposure. It noted, however, that interest remains strong in CDMOs and GLP‑1 drug manufacturers, while healthcare services appear poised for double-digit growth thanks to facility expansions.
Tariff and product-mix concerns: Nuvama flagged persistent worries about a potential shift in US import policy, which could impose higher duties on Indian generics such as gRevlimid, gMyrbetriq, gSpiriva, gJynarque, and Lanreotide. The next two months are seen as pivotal for potential rule changes. It added that Cipla's strong pipeline—featuring products like gAbraxane and gSymbicort—and market-share gains in Lanreotide may calm investor fears.
Sustained interest in CDMO and GLP‑1 space: Despite US export uncertainty, investors are positive about CDMOs. Firms like Aarti Pharmalabs have benefitted from production shifts from China. Jubilant Pharmova, Divi's, and Dr Reddy's continue to prosper, supported by growth in fill-finish services and GLP‑1 demand—what Nuvama described as 'near-term opportunities.'
Optimism in healthcare services: Nuvama also sees promise in healthcare infrastructure. Companies like Laxmi Dental, Jupiter Lifeline, Suraksha, Aster DM, and Jeena Sikho are expanding inpatient capacity and operating efficiently. New centres and investments in diagnostics, digital tools, and hospital beds are expected to underpin robust revenue and margin growth.
Nuvama's Top Picks & Emerging Themes
Analyzing their coverage, Nuvama identified several names with strong potential:
Aurobindo Pharma ('Buy', ₹ 1,460 TP): Valued at around 14× FY27E EPS, its Pen‑G facility restart and pipeline investments in biologics and peptides are likely to drive growth.
Jubilant Pharmova ('Buy', ₹ 1,385 TP): Positioned to benefit from re‑shoring trends in US manufacturing and sustained demand for CDMO services.
Lupin ('Buy', ₹ 2,570 TP): With key US launches including gSpiriva and gXarelto, its FY26 PAT growth projection of 19 percent underpins a strong outlook.
Laxmi Dental ('Buy', ₹ 530 TP): Laxmi is gaining from underpenetrated oral health markets, digital dental tools, and export growth in aligners.
Jupiter Lifeline ('Buy', ₹ 1,800 TP): On track to double bed capacity with greenfield expansions and ramp up revenue through capacity utilisation.
Aarti Pharma: Benefiting from new CDMO projects and expanded intermediate capabilities.
Eris Life: Positioned to leverage insulin and GLP‑1 demand, expected to reach PHY26 profitability inflection.
OneSource Specialty: Peptide and biologics CDMO poised for early commercial launches.
Shilpa Medicare: Focusing on niche and high-value products like 505b2 and ADCs.
Aster DM: With bed expansions and merger synergies, set to become a top-tier hospital chain.
Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.