Dr Reddy’s, Sun Pharma and other pharma stocks fall up to 3% as Trump threatens 25% tariff on India

Shares of major Indian pharmaceutical companies slumped as much as 3% on July 31, after U.S. President Donald Trump declared a 25% tariff and additional penalties on Indian goods, citing India’s ongoing trade with Russia. The move rattled investor sentiment, particularly in export-focused sectors such as pharma, which have so far been exempt from reciprocal tariff action under the U.S.’s Section 232 trade investigations.

The Nifty Pharma index dropped as much as 1.5% during the day. Shares of Ipca Laboratories led the decline, falling as much as 3.2% to Rs 1,480.10, while Zydus Lifesciences was down 3% to Rs 965.20. Dr Reddy's Laboratories, Biocon, Cipla and Sun Pharma also lost between 1% and 3%.

India’s pharmaceutical sector, which currently enjoys zero-tariff access to the U.S. for its generic drugs, may be directly impacted if the 25% tariff is applied to drug exports as well.


“The U.S. administration’s sudden announcement of a 25% tariff on all Indian imports starting August 1 seems to have injected some volatility across the Indian markets, affecting export-driven sectors to the US, like pharma, and auto makers, among others,” analysts at Nomura said.

“Sectors under ongoing Section 232 investigation (pharmaceuticals, semiconductors & electronics, among others) are currently exempt from reciprocal tariffs, while existing Section 232 tariffs will apply on steel & aluminum (50%) and autos – finished and parts (25%),” Nomura said.

Strategic recalibration ahead

Utsav Verma, Head of Research, Institutional Equities at Choice Broking, said the latest development is likely to trigger a reassessment of investor positioning across key export sectors. “In response to President Trump’s recent imposition of a 25% tariff and penalties on Indian goods, investors will reassess their strategies with a mix of caution and optimism,” he said, adding that “sectors like textiles, pharmaceuticals, and automotive components—key Indian exports—are likely to be most impacted and may see reduced investor interest in the short term.”

Still, Verma struck a note of guarded optimism about the broader trade outlook. “Recent progress in trade negotiations suggests a constructive path forward, and we believe that the trade deal will eventually follow provided both nations show the necessary political will,” he said. “Many investors expect the tariff rate to eventually settle around 15%, paving the way for renewed confidence and stronger trade ties.”

“In the short term, the market will try to shed off its complacency. We do not expect a huge knee-jerk reaction but a range-bound market focused on ongoing earnings,” Verma said.

Limited options for Indian pharma

Should the new tariffs extend to pharmaceuticals, analysts are of the view that Indian drugmakers may be forced to consider options such as passing the additional cost on to consumers, removing low-margin products from the U.S. market, or manufacturing within the U.S., though the latter would likely erode the cost advantage generic producers currently enjoy.

Sun Pharma, which was among the stocks under pressure on Thursday, is set to report its quarterly results later in the day.

India’s top generic drug exporters including Dr. Reddy's Laboratories, Divi's Laboratories, Cipla, Aurobindo Pharma, Lupin and Biocon will likely remain in focus as markets assess the full implications of the U.S. administration’s latest tariff salvo.

Also read | Trump’s tariffs threaten to deepen $248 billion India stock rout

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