Indian Pharma Stocks Slide Amid Trump’s Threat of Tariffs
Market Reaction
The Indian pharmaceutical industry was hit hard on Wednesday as the Nifty Pharma index slid 2% to its lowest level in seven months, following U.S. President Donald Trump’s announcement that he intends to impose tariffs of about 25% or higher on pharma imports.
Stock Performance
Twelve of the 20 stocks on the sub-index traded lower, with Sun Pharma, India’s top drugmaker by revenue, falling 2%, and Dr Reddy’s slipping 4% to its lowest level since June. Aurobindo Pharma tumbled 6% to its lowest level in nearly a year, and Cipla, India’s no. 3 drugmaker, shed 2.2%.
Impact on Indian Pharma Exports
Indian drugmakers earn a significant share of revenue from the U.S., the largest importer of Indian pharma products. India’s pharma exports to the country stood at $8.73 billion in fiscal 2024 – a nearly 16% increase from previous year – accounting for about 31% of the industry’s overall exports, according to data from the government-backed trade body Pharmaceuticals Export Promotion Council of India (Pharmexcil).
Analyst Insights
Trump’s tariff plans are making investors jittery at the moment, as most of these companies rely on the U.S. for most of their revenue, said Shrikant Akolkar, a pharma analyst with Nuvama Institutional Equities. "Even if these companies start setting up manufacturing within U.S. borders, it is a long way to go as they would need fresh approvals and also labor which is costlier in the U.S. compared to India," Akolkar said.
Industry Reaction
Earlier this week, Sun Pharma MD Dilip Shanghvi told ET Now that tariffs, if imposed, will be passed on to consumers. Pharma stocks have lost about 12% so far this year, while the benchmark Nifty 50 declined 4%.
Conclusion
The Indian pharmaceutical industry is facing a significant challenge with the potential imposition of tariffs by the U.S. government. The impact of these tariffs will not only affect the Indian companies but also the consumers in the long run. The Indian government and industry leaders must work together to find a solution to this issue and ensure that the industry remains competitive in the global market.
Frequently Asked Questions
Q: What is the impact of Trump’s tariff plans on Indian pharma stocks?
A: The Indian pharmaceutical industry is likely to be significantly impacted by the potential imposition of tariffs by the U.S. government, with stocks already sliding 2% to their lowest level in seven months.
Q: How will Indian pharma companies be affected by the tariffs?
A: Indian pharma companies rely heavily on the U.S. market, and any tariffs imposed could lead to a significant reduction in their revenue.
Q: Will Indian pharma companies be able to set up manufacturing units in the U.S. to avoid tariffs?
A: While Indian pharma companies can set up manufacturing units in the U.S. to avoid tariffs, it would require fresh approvals and labor, which is costlier in the U.S. compared to India.