Aurobindo Pharma, Lupin to Natco Pharma: Why Is Nifty Pharma Index Nosediving Today? EXPLAINED

Mumbai, June 17, 2025 – The Nifty Pharma Index slipped sharply in Tuesday’s trading session, shedding over 2% intraday, as major pharmaceutical players including Aurobindo Pharma, Lupin, Natco Pharma, and Sun Pharma witnessed heavy selling pressure. The broader market sentiment remained under stress following a mix of regulatory setbacks, weak global cues, and profit-booking in pharma counters, dragging down the healthcare-heavy benchmark.

Let’s take a closer look at what triggered this steep fall in one of the market's traditionally defensive sectors.

Steep Declines Across Pharma Giants

The day saw most pharma heavyweights trading in the red. As of mid-day:

• Aurobindo Pharma declined by 4.3%, after reports of regulatory observations from the USFDA.

• Lupin dropped 3.7%, reacting to margin concerns raised in the latest investor call.

• Natco Pharma slumped 5.1%, on profit-taking after a sharp rally last week.

• Sun Pharma and Dr. Reddy’s also saw cuts of 1.5-2%, dragging the overall index lower.

Key Triggers Behind the Fall

1. USFDA Action Weighs on Sentiment

The major drag came from the news that the US Food and Drug Administration (USFDA) had issued Form 483 observations for Aurobindo Pharma’s Unit III formulation facility in Telangana. While the company claimed that no critical observations were made, investors reacted cautiously.

“Investors are hypersensitive to regulatory actions, especially from the USFDA, given the sector’s reliance on exports to the US,” said Amit Prakash, Senior Pharma Analyst at JM Financial.

USFDA scrutiny often affects future drug approvals and sales forecasts, raising risk premiums for companies in question.

2. Profit Booking After Recent Rally

The Nifty Pharma index had surged nearly 12% in the past one month, outperforming the broader indices. This rally was driven by strong earnings from select firms, new product launches, and optimism about global demand.

However, analysts believe that profit booking was inevitable.

“The recent correction is a technical reaction. Most stocks were trading near overbought zones and needed a breather,” noted Meenakshi Rao, Head of Equity Research at Angel One.

3. Global Pharma Slowdown Concerns

Adding to the pressure were concerns about a slowdown in demand from the US and Europe, two key markets for Indian pharma exports. Several global brokerages have revised down their growth estimates for Indian pharma in FY26 due to ongoing price erosion in generics and regulatory tightening.

“Even though Indian firms are resilient, the global landscape has become challenging. Pricing pressure in the US generics market continues to weigh down on margins,” said Devika Shah, Global Healthcare Strategist, Nomura India.

4. Currency Volatility Adds to the Woes

The rupee’s recent strength against the US dollar has also dampened export expectations for pharma companies, which earn a significant chunk of their revenues in foreign currencies.

A stronger rupee reduces the profitability of exported goods when earnings are converted back to INR.

Market Context: Pharma’s Defensive Tag Under Pressure

Pharma stocks have traditionally been seen as defensive bets during market turbulence, thanks to their steady demand profile. But in 2025, the sector has seen increasing volatility, with investors now viewing the sector through a more cyclical lens, especially in the wake of post-pandemic normalisation.

Despite being up around 8% year-to-date, today’s correction highlights the fragility of sentiment in the face of operational or regulatory risks.

Analyst Outlook: Should Investors Worry?

Most market watchers advise caution, not panic. While short-term headwinds exist, the long-term growth story remains intact, they say.

“Today's dip presents a good opportunity for long-term investors to accumulate quality pharma names at lower valuations,” said Nikhil Thakkar, Fund Manager at Axis Mutual Fund.

Brokerages continue to prefer companies with strong compliance records, niche product pipelines, and diversified revenue bases. Among the top picks are Sun Pharma, Cipla, and Dr. Reddy’s, where analysts see continued traction in branded generics and specialty drugs.

Investor Strategy: Selectivity Is Key

Investors are advised to stay selective and focus on the fundamentals rather than broad-based buying.

• Avoid stocks facing regulatory hurdles until clarity emerges.

• Watch Q1FY26 earnings for margin and growth signals.

• Look for companies with exposure to high-value therapies and US specialty portfolios.

“This is not a sectoral reversal. It’s a short-term correction driven by news flow. Patient investors should use this volatility wisely,” concluded Raunak Mehta, Healthcare Analyst at Motilal Oswal Securities.

The sharp decline in the Nifty Pharma Index today is a result of a confluence of near-term headwinds, including regulatory concerns, profit-taking, and external factors like currency strength. While these factors may impact short-term sentiment, the medium-to-long-term outlook for the sector remains optimistic.

For investors, the key is to stay focused on companies with operational excellence and regulatory reliability, as the Indian pharmaceutical industry continues to play a vital role in global healthcare.