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Tariff worries, Sun Pharma Q1 miss: Why are pharma stocks falling today?
Here's why pharma stocks are falling today:
The sector came under pressure after President Trump announced a 25 per cent tariff rate for Indian exports to the US on Wednesday. Notably, the US relies heavily on India for its pharmaceutical needs, with around 50 per cent of generic drugs sourced from India. However, analysts suggest that due to the structural dependence on Indian pharma and the cost sensitivity of the US healthcare system, the likelihood of material near-term tariffs on pharma is low.
Maitri Sheth, equity research analyst for the pharmaceutical sector at Choice Broking, stated that drug formulations and Active Pharmaceutical Ingredients (APIs) are currently excluded from this tariff, consistent with the April 2025 reciprocal tariff framework, which explicitly exempted pharmaceuticals.
"We flag the ongoing Section 232 investigation into pharma imports by the US as a medium-term overhang, with the potential for pharma-specific tariffs to be announced in the coming weeks or months. In the absence of clarity on the potential rate and scope of such tariffs, it remains difficult to quantify the impact on Indian pharma players at this stage," she added.
"From our initial management interactions, we understand that larger players with manufacturing facilities in the US are likely to remain broadly insulated, while others anticipate a limited impact, with plans to pass on incremental costs to customers where feasible," said Sheth.
Sun Pharma Q1 results
Shares of Sun Pharma fell 4.6 per cent to hit an intraday low of ₹1,626.5 on the NSE after the drug maker reported a 20 per cent year-on-year decline in consolidated net profit to ₹2,278 crore for the June 2025 quarter (Q1FY26) compared to ₹2,835 crore in the year-ago period. The stock was a top laggard on the Nifty Pharma index.
However, consolidated revenue of the company rose over 9 per cent to ₹13,851 crore in the reported quarter from ₹12,653 crore in the June 2024 quarter. The strong growth was driven by strong growth across markets, including India, the US, and the Rest of the World (ROW) regions.
According to analysts at Motilal Oswal Financial Services, Sun Pharma's profit was a miss due to lower other income and a higher tax rate.
The brokerage reduced its earnings estimates by 5/4 per cent for FY26/FY27, factoring in higher operational expenditure for the branded business and a higher tax rate. "We value Sun Pharma at 32x 12M forward earnings to arrive at a target of ₹1,960," it said. "We await clarity on the US tariff implications on SUNP's innovative medicines portfolio," the brokerage added.
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