Why Pharma Stocks Are Falling: Key Reasons for Nifty Pharma’s Decline

The Nifty Pharma index faced significant pressure on Monday, February 10, 2025, slipping by as much as 2% and reaching an intraday low of 21,634.75. The 3 main reasons behind the sharp decline in pharma stocks:

Trump Tariff Fears 

One of the key factors weighing on the pharma sector is the uncertainty surrounding potential tariffs under former President Trump’s policies. If tariffs are imposed, Indian pharma companies could be severely impacted. Rising costs of raw materials, particularly Active Pharmaceutical Ingredients (APIs), could lead to higher production costs. This, in turn, would reduce profit margins and affect the companies’ competitiveness in export markets. 

Stretched Valuations 

Another reason for the decline in the pharma sector is the stretched valuations of certain pharma stocks. Many of these stocks have been trading at higher-than-normal prices, and with a major reduction in overall market capitalisation in recent months, investors have become wary of these high valuations. As a result, tighter liquidity has led to selling pressure, even on pharma stocks that are still reasonably valued. 

Margin Calls Leading to Desperate Selling 

The third factor affecting the decline in the Nifty Pharma index is margin calls, which are forcing many investors to sell their holdings in desperation. A margin call happens when the value of an investor’s holdings drops below the minimum required level set by the broker. As a result, investors are required to sell their assets to meet the margin requirements, leading to forced liquidation of stocks. 

Stocks Affected 

As of 11:43 AM, 19 out of the 20 stocks in the Nifty Pharma index are trading in the negative territory. Among the hardest-hit stocks, Alkem Labs saw a sharp decline of 7%, while Ipca and Laurus Labs dropped over 4%. Other stocks like Granules and Divi’s also faced declines of around 3%, while Aurobindo Pharma saw a 2.5% drop. Biocon, Zydus Life, Ajanta Pharma, Lupin, and Gland Pharma experienced declines in the range of 2-2.5%. Stocks such as Natco, Dr. Reddy’s, Cipla, Mankind, Torrent, Sun Pharma, Abbott, and Glenmark slipped by 1-2%.

However, JB Chemicals and Pharma was one of the exceptions, seeing a slight gain of 0.4% despite the weak market conditions.

In conclusion, the sharp fall in the Nifty Pharma index is due to a combination of tariff-related concerns, stretched valuations, and margin calls leading to forced selling. These factors have created a tough environment for pharma stocks in the market.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

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