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Informist, Tuesday, Jun. 17, 2025

By Anjana Therese Antony

MUMBAI – It is likely that shares of Sun Pharmaceutical Industries will see more near-term weakness due to the recent observations by the US Food and Drug Administrations on its Halol unit in Gujarat and on worries about US tariffs. Media reports of US President Donald Trump saying tariffs are "coming very soon" led to heavy selling in most pharma stocks, including Sun Pharma. The likely near-term weakness in the stock price is evident from positions taken by traders in the options chain of the company, where premiums across put contracts doubled, while those on most call strikes tumbled.

The drug maker's revenue from sale of formulations in the US accounted for more than 30% of its consolidated top line during the March quarter at INR 40.20 billion. Compared to the year-ago period, sales from US formulations declined almost 3% in the three months ended March. The Mumbai-based company had posted a consolidated net profit of INR 21.50 billion on revenue of INR 129.59 billion for the quarter. Pharmaceutical products are among the very few goods on which the US administration has not announced any tariffs yet. In April Trump had said he will soon announce tariff on pharma imports, but no further decision was taken on the same.

Adding to the woes of Sun Pharma was the recent observations by the US FDA on its Halol unit in Gujarat. The drug regulator issued eight observations to this unit, which has been under the radar for a long time. The same unit had got the regulator's warning letter in December 2022 for violations with respect to good manufacturing practices. Prior to this, the FDA had listed the unit under 'import alert' after finding deficiencies in manufacturing processes. 

On Tuesday, the stock closed lower for the second straight session after the FDA's observations. The stock closed more than 2% lower at INR 1,650.20 on the National Stock Exchange. The near-term support for the stock is seen at INR 1,620-INR 1,580 and resistance at INR 1,660-INR 1,700, according to a senior derivatives analyst with a domestic broking firm.

Premiums on out-of-the-money call strikes INR 1,660-INR 1,780 declined around 46%, while those on put contracts INR 1,640-INR 1,500 increased 153-250%. The highest addition of open interest was at INR 1,660 call and INR 1,640 put options. The maximum open interest concentration was at INR 1,700 call and INR 1,600 put contracts expiring Jun. 26. Traders also added bearish positions to the futures contracts of Sun Pharma, with open interest in the June series rising over 4% to 18.32 million and that in the July contract increasing 43% to 1.31 million.

Rising worries about US tariffs, rising geopolitical tension between Iran and Israel and the consequent rise in global crude oil prices, have also been weighing on the market in the near term. The Brent crude oil futures contract traded on the Intercontinental Exchange was up 1.5% at $74.78 per barrel, sharply higher than $58 per barrel in April.

The Nifty Tuesday closed 0.4% lower at 24853.40 points and the BSE Sensex ended 0.3% lower at 81583.30 points. The options chain of the Nifty 50 also hints at limited movement of the index ahead of its expiry Thursday. While premiums across out-of-the-money call contracts of the index nosedived, those on some put contracts closer to the spot level increased marginally. 

Market participants now await the monetary policy outcome of the US Federal Reserve's two-day meeting which starts Tuesday. While the apex bank is widely expected to keep interest rates steady, investors will closely watch for Chairman Jerome Powell's comments on the US economy's strength, inflation, risks associated with US tariffs, and future interest rate trajectory, among others.

--Nifty 50 Jun closed at 24859.80, down 136.40 points; 6.40-point premium to the spot index

--Nifty 50 Jul closed at 24982.00, down 131.30 points; 128.60-point premium to the spot index

--Nifty 50 Aug closed at 25082.20, down 138.40 points; 228.80-point premium to the spot index

BSE, Infosys, HDFC Bank, Biocon, Multi Commodity Exchange of India, Bharat Electronics, Hindustan Aeronautics, Tata Motors, Reliance Industries, Bajaj Finance, ICICI Bank, Mazagon Dock Shipbuilders, DLF, Bharti Airtel, Dixon Technologies India, Hindustan Zinc, State Bank of India, Tata Consultancy Services, Sun Pharma, and Oil and Natural Gas Corp. were the most active underlying stocks Tuesday.  End

Edited by Ashish Shirke

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