Whereas the across-the-board duties threaten to make some exports unviable, the exemption for prescribed drugs—India’s largest export class to the US—supplied a uncommon brilliant spot, triggering a rally in Indian drugmaker shares on Thursday.
Pharma breathes simple— for now
The exclusion of prescribed drugs, which account for almost 14% of India’s exports to the U.S., from the tariff checklist supplied reduction to Indian drugmakers, however brokerages warned that the reprieve might not be everlasting.“Pharma-specific tariffs at a later date can’t be absolutely dominated out,” Jefferies mentioned, although it at the moment sees minimal affect on Indian drugmakers. The brokerage famous that US-focused generic pharma shares have been prone to rally, with Syngene deriving 68% of its income from the US, Gland Pharma 54%, and Biocon 50%, making them among the many largest beneficiaries.
Citi mentioned the exemption aligns with its view that the chance of US tariffs on Indian pharma was at all times low however added that it stays unclear whether or not it is a short-term or medium-term association. CLSA echoed this view, noting that pharma shares had already priced in a possible 10% tariff, making them “prone to bounce again.”
Wider financial fallout looms
Past prescribed drugs, brokerages painted a grim image for Indian exports, warning that the broad-based tariffs may disrupt commerce flows. Macquarie highlighted that auto exports, which make up 3% of India’s whole shipments to the US, may also be hit, including that the 26% responsibility “may have a big affect on India’s GDP.”UBS mentioned the size of the tariffs was “larger than anticipated” and will render some exports unviable, calling it a unfavourable growth for the Indian market. The brokerage added that whereas pharma has been excluded for now, it stays beneath evaluate, leaving the door open for future tariff changes.
Bernstein described Trump’s transfer as “a historic step towards a brand new world order” and predicted that it will set off months of back-channel negotiations. “Many of those charges could not final past H2 2025,” the brokerage mentioned, suggesting that the present tariff construction may not be everlasting.
India’s IT sector in danger, however China’s loss may very well be India’s acquire
Bernstein famous that whereas India is going through larger tariffs, it may stand to learn from China’s steeper 34% responsibility, which comes into impact on April 9. The brokerage prompt that some U.S. corporations may pivot away from China towards India for sourcing, providing a possible long-term benefit.
Nevertheless, the brokerage warned that the largest threat comes from a decline in U.S. discretionary spending, which may hit India’s IT providers sector. In consequence, Bernstein downgraded Indian IT shares to ‘equal-weight’ whereas upgrading healthcare to the identical score as a consequence of its restricted tariff publicity.
Markets react to tariff shock
Indian inventory markets mirrored broader uncertainty, with the Sensex and Nifty50 opening decrease on Thursday as traders digested the affect of Trump’s announcement. Whereas most sectors declined, prescribed drugs emerged because the day’s clear winner, with Dr. Reddy’s up 6% and Cipla and Solar Pharma gaining over 4%.
As India prepares for negotiations with the US, brokerages say the long-term commerce affect stays unsure. For now, pharma breathes simple—however the remainder of India Inc. is bracing for a protracted tariff battle.
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