US President Donald Trump announced a 100 % tariff on patented drugs last week. This will come into effect from 1 October. This news saw a decline on shares of Indian pharma companies. However, the fund managers of mutual funds have confidence on the shares of pharma companies. They believe that Indian pharma companies have the ability to combat every situation. Therefore, short term shaking will not affect them much.
According to a survey by brokerage firm Motilal Oswal, 16 of the big 20 fund houses have made big bets in the shares of pharma companies. Among the companies that have more investment of fund houses, Abbott India, Sun Pharmaceutical, Cipla, Dr. Reddy’s Laboratories, Lupin, Divi’s Laboratories, Glenmark Pharma and Biocon are included. Many fund managers are not only considering pharma stocks as defensive but they have confidence in the structural growth story of the pharma industry.
Trump has just imposed 100 percent tariff on patented drugs. Most of India’s pharma companies make generic medicines. So at present, Trump’s tariff will not affect the shares of Indian pharma companies. Shailesh Raj Bhan, Chief Investment Officer of Nippon India Mutual Fund, said that Indian forma companies exporting America have been under pressure for the last 6 to 9 months. During this time the return of his shares has been negative. One of the major reasons for this is the possibility of tariffs in America. However, it has become clear from Trump’s announcement last week that generic medicines are outside the scope of tariffs. This is a relief for Indian pharma companies.
He said that the valuation of Forma Stocks is attractive compared to other sectors. He said, “Therefore we are increasing investment in shares of pharma companies. Indian pharma companies will get their capacity to expand business, competition in global market and better management. Even though the profit in the generic segment is low, there is stability in it. There is no such thing in the second sector. There is no such thing in the second sector. There is also good potential for India’s branded drugs.
Experts say that Trump’s tariff is expected to affect very few pharma companies in India. Prashant Nair, lead analyst at Ambit Capital, said the US tari can affect Sun Pharma’s specialty portfolio. The company’s 20 % revenue comes from the supply of specialty products to the US. Manufacturing companies in the US will be out of the scope of tariffs. Generic products manufactured in America will also not affect the tariff. Branded products of companies like Cipla and Dr. Reddy’s do not have much stake in the market.