Sun Pharma, Granules India to JB Chem: Pharma stocks tank up to 6% amid fears of US tariffs on drug imports

Stock market today: Indian pharma stocks extended their losing streak to the third consecutive trading session on Thursday, March 27, as concerns grew that US President Donald Trump may announce tariffs on pharmaceutical imports, following his imposition of duties on automobiles.

On Wednesday, Trump announced a 25% tariff on auto imports, a move the White House claims would foster domestic manufacturing but could also put financial pressure on automakers reliant on global supply chains.

This action came ahead of a broad array of additional levies expected to be revealed next week. Earlier this week, Trump had stated that he would impose tariffs on pharmaceutical and automobile imports, with domestic pharma stocks reacting more negatively as India's drug and pharmaceutical exports grew 9.67% YoY to $27.9 billion in FY24, even as total exports dipped 3% in the last fiscal year, according to commerce data.

Nifty Pharma index tumbles 1.5%

Amid this negative sentiment, the Nifty Pharma index tumbled another 1.5% in today's session to the day's low of 21,042, taking its three-day cumulative drop to 3%.

Among individual performers, J B Chemicals & Pharmaceuticals shares emerged as the top laggards, dropping 6%. Ajanta Pharma, Granules India, and Sun Pharmaceutical also traded with losses, ranging between 2% and 4%.

Uncertainty surrounding the scale of US tariffs, the possibility of retaliatory measures from trading partners, and the potential ripple effects on the global economy and businesses have kept investors on edge over the past month.

However, investors also anticipate that Trump could soften his stance after hinting that not all tariffs would be imposed by the April 2 deadline, with potential exemptions for certain countries, though details remain unclear.

US Commerce Secretary Howard Lutnick had earlier stated that India's import tariffs, among the highest in the world, warrant a reassessment of its "special relationship" with the United States.

In an attempt to circumvent the trade war, India is open to cutting tariffs on more than half of US imports worth $23 billion in the first phase of a trade deal the two nations are negotiating, two government sources told Reuters.

Indian pharma stocks underperformed during Trump 1.0

During Trump’s first term in office, the Indian pharmaceutical sector struggled with challenges including consolidation in US distribution channels, regulatory challenges from the FDA concerning key plants, a lack of major product approvals, price control measures, and a ban on FDCs in India.

Nifty Pharma delivered a close to 20% return during Trump’s first term (Jan-2017 to Jan-2021) vs. Nifty 50’s absolute return of 80%. Large-cap stocks such as Cipla tumbled 16% between 2017 and 2019, while those of Sun Pharma and Lupin corrected by 31% and 49% during the same period, as these companies had significant exposure to the US markets and were directly impacted by the regulatory and policy changes.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.