Shares of pharma companies witnessed strong buying on Thursday, in an otherwise weak broader market, after U.S. government excluded pharmaceuticals products from the reciprocal tariffs announced by U.S. President Donald Trump overnight. The Trump administration imposed 26% tariffs on all imports from India, but exempted pharmaceuticals from higher reciprocal duty.

Cheering the news, Nifty pharma index rose up to 3% in intraday trade today, while the benchmark indices BSE Sensex and NSE Nifty declined as much as 0.5%.

In the Nifty pharma index, IPCA Labs, Lupin, Sun Pharma, Cipla, and Gland Pharma were among top five gainers, rising in the range of 3-5%. Among others, Natco Pharma, Aurobindo Pharma, Glenmark Pharmaceuticals, Biocon, Dr Reddy's Laboratories, and Mankind Pharma gained in the range of 1% to 2%.

The Nifty Pharma Index has declined by 11% year-to-date (YTD) as news flow related to the possible imposition of tariffs trigged volatility across the sector over the last few months.

Analysts view on pharma stocks

As per the fact sheet shared by the White House, pharmaceuticals are exempted from higher reciprocal tariffs. However, we wait for more details and note that higher tariffs are not completely ruled out for the future on pharmaceuticals, said Tausif Shaikh, India Analyst - Pharma and Healthcare, BNP Paribas India.

“Assuming a 10% tariff is imposed on pharma products, we expect the impact to be negligible. With the sector exempted from reciprocal tariffs currently, we expect a relief rally for the Nifty Pharma Index, after its 11% YTD decline,” he added.

The analyst at BNP Paribas believes that any incremental tariff (if imposed) would have to be absorbed by the manufacturer or members of the supply chain (retailer, distributor, pharma benefit managers) along with consumers. “We believe Indian generic companies will bear only a small proportion as they operate at a low margin compared to innovators.”

VK Vijayakumar, Chief Investment Strategist, Geojit Investments, says, “The exemption given to Indian pharmaceuticals is positive and, therefore, this segment is likely to witness buying. Even in a weak market, domestic consumption driven sectors will be regarded as safe havens by investors.”

(DISCLAIMER: The views and opinions expressed by investment experts on fortuneindia.com are either their own or of their organisations, but not necessarily that of fortuneindia.com and its editorial team. Readers are advised to consult certified experts before taking investment decisions.)