Pharma stocks have caught the attention of investors again, with the Nifty Pharma index reaching new highs on Tuesday. Investors are turning to the pharma sector, considered a safer bet, as the broader market sees a rally and a strong-performing drug boosts interest. On Tuesday, the pharma index rose by 0.8% while the main Nifty index remained almost flat.
Nikhil Ranka, CIO at Nuvama Asset Management, explained, “Investors who prefer lower risk are moving money from defence and railway stocks to pharma because it’s not a cyclical sector, and there’s less risk of losing money during economic downturns.”
So far this year, the Nifty Pharma index has increased by 34.82%, while the Nifty index has gone up by 15.07%.
Rajesh Palviya of Axis Securities recommended Lupin, Sun Pharma, Dr. Reddy’s Lab, and Glenmark Pharma as top picks in the sector. Foreign investors have also shown interest, buying healthcare stocks in August while selling in other sectors. In the first half of August alone, the pharma sector received ₹3,462 crore in foreign investments.
Aditya Khemka of Incred Asset Management noted that foreign investors are focusing on sectors with moderate growth expectations, like pharma, which is less affected by economic changes. They are shifting money from high-growth sectors to safer options like pharma.
A key factor boosting pharma stocks is the sales of the generic version of Revlimid, a drug used to treat blood cancers, in the US. Companies like Dr. Reddy’s, Zydus Lifesciences, Sun Pharma, and Natco Pharma have benefited from selling this drug. However, by FY26, Revlimid will lose its exclusivity, which could hurt profits.
Khemka added that generic drug companies are currently valued highly, while branded generic companies are trading closer to their usual valuations. Branded generic companies, which don’t rely on the US market, are expected to maintain steady earnings.
Analysts believe that pharma stocks could continue to rise, with technical indicators suggesting further gains. Rajesh Palviya noted that the sector has been consolidating for a while and recently broke out, indicating that the index could move 10-15% higher this year.
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