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Informist, Friday, Apr. 4, 2025

 

By Alina Geogy

 

MUMBAI – US President Donald Trump's surprise announcement late Thursday that the pharmaceutical sector would not be spared from the tariff attacks sparked bearish bets in the derivatives contracts of Indian pharmaceutical stocks on Friday. Traders, who were bullish on these stocks just a day before as the sector was kept out of the reciprocal tariffs, unwound their long positions or added fresh short bets in these contracts.

 

"The pharma is going to start coming in, I think, at a level that we haven't really seen before", Trump told reporters on Thursday. "We are looking at pharma right now. Pharmaceuticals. It's a separate category. We'll be announcing that sometime in the near future. It's under review right now," he said.

 

US tariffs on pharmaceutical products are expected to lead to substantial operational and supply chain challenges for companies, Nuvama Institutional Equities said in a report Thursday. India exports pharmaceutical goods worth around $10 billion to the US, which is around 6% of the total US pharma imports and 2.5% of the total medicine spend, the brokerage said. As generics provide over $400 billion in annual savings to the US healthcare sector, imposing tariffs on generic pharma products would be counterproductive, the brokerage said.

 

The pharmaceutical sector may not have any immediate hit as it is currently exempted from the purview of reciprocal tariffs by the US, CARE Ratings said in a report. Even if tariffs are imposed, the sector should be well-positioned to pass its effect on significantly due to its inherent competitive strengths, the rating agency said.

 

Shares of pharmaceutical stocks plunged in the cash market following Trump's comments, with some stocks closing with losses of over 7%. Granules India and Laurus Labs closed down around 7?ch, while Gland Pharma, Lupin, Aurobindo Pharma, and Ipca Laboratories ended 5-7% lower. Among Nifty 50 constituents, shares of Sun Pharmaceutical Industries, Dr. Reddy's Laboratories, and Cipla fell 3-5%. Losses in these stocks pulled down the Nifty Pharma by 4% to a near-one-month low.

 

Cipla, Dr. Reddy's Laboratories, Sun Pharmaceutical Industries and Lupin were among the most active underlying stocks Friday. Traders unwound long positions in the deep out-of-the-money call options of Cipla expiring this month and added short positions in some of its out-of-the-money and in-the-money calls. The INR 1,420-call strike had the highest change in open interest, with premium falling 61%. Among the put options of Cipla, the highest change in open interest was at the INR 1,300 strike. The active call and put strikes indicate that traders expect more downside than upside for the stock in the near term. This trend was similar for options contracts of other pharma stocks, such as Sun Pharma and Lupin.

 

Meanwhile, worries about the impact of US tariffs on global trade and potential retaliation by other countries weighed on global markets Friday. India's domestic benchmark Nifty 50 index closed at 22904.45 points, down 1.5%, on Friday. The sharp fall led traders to add short positions to the futures contracts of the index. The Nifty 50's April futures contract closed at a premium of 63.05 points to the spot index. Open interest in the contract rose 7% to 13.94 million, as per provisional data. Traders also added short positions across the weekly options chain of the index, with the 24000-call and 21700-put options having the maximum change in open interest.

 

--Nifty 50 Apr closed at 22967.50, down 358.45 points

--Nifty 50 May closed at 23095.20, down 355.00 points; 190.75-point premium to spot index

--Nifty 50 Jun closed at 23191.00, down 369.50 points; 286.55-point premium to spot index

 

HDFC Bank, Reliance Industries, Bajaj Finance, ICICI Bank, Tata Motors, Tata Steel, Infosys, Coforge, State Bank of India, Tata Consultancy Services, Axis Bank, Persistent Systems, Bharti Airtel, Hindalco Industries, Vedanta, Aurobindo Pharma, Hindustan Aeronautics, Oil and Natural Gas Corp., Sun Pharmaceutical Industries, and Lupin were the most active underlying stocks Friday.  End

 

Edited by Saji George Titus

 

 

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