Pharma Stocks Outperform as Sector Sentiment Turns Strongly Positive
Shares of leading pharmaceutical companies surged on January 6, lifting the broader sector and pushing the Nifty Pharma index up nearly 1.7 percent to 23,126.85. The rally came amid a series of positive brokerage notes on key pharma players and a favourable long-term outlook for India’s contract drug manufacturing space.
Stocks such as Divi’s Laboratories, Lupin, IPCA Laboratories, and Aurobindo Pharma led the gains, rising between 2 percent and 4.5 percent. Market participants said the move reflects growing confidence in the sector’s earnings visibility and structural growth drivers.
Brokerages Cite Consistent Domestic Growth and Selective Buying
Analysts attributed the rally to both fundamental and sentiment-driven factors. Vinod Nair, Head of Research at Geojit Investments, said pharma stocks advanced on the back of steady growth in the Indian Pharmaceutical Market (IPM) during December.
“Pharma stocks advanced due to the consistent growth reported by the IPM for December,” Nair said, adding that domestic formulations continue to show resilience despite broader market volatility. Bajaj Broking, meanwhile, noted that selective buying in fundamentally strong names also contributed to the sharp upmove.
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HDFC Securities Flags CRDMO as a Key Long-Term Growth Engine
A major catalyst for the sector was a bullish report from HDFC Securities, which initiated coverage on several Indian contract drug makers. These include Divi’s Labs, Anthem Biosciences, Sai Life Sciences, Laurus Labs, and Piramal Pharma.
The brokerage highlighted the rapid expansion of research and development outsourcing, which is boosting opportunities for Indian contract research, development, and manufacturing organisations (CRDMOs). According to HDFC Securities, India’s share in the global CRDMO market is expected to rise to 4.7 percent by 2029 from 3.8 percent in 2024, “making it an attractive sector.”
China Plus One and Cost Advantage Strengthen India’s Case
HDFC Securities said India is well-positioned to benefit from global pharmaceutical companies reducing dependence on China. Lower labour costs, improving regulatory compliance, and expanded end-to-end capabilities across drug development stages give Indian players a competitive edge.
The brokerage expects:
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Revenue CAGR of 15 percent during FY25–FY28, compared with 9 percent in FY23–FY25
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EBITDA CAGR of 22 percent during FY25–FY28, versus 12 percent earlier
“These trends point to accelerating earnings growth and improving operating leverage for Indian CRDMO players,” the brokerage said.
Divi’s Labs Emerges as Top Pick, Citi Sees Inflection Year Ahead
Among individual stocks, Divi’s Laboratories stood out, jumping over 4.5 percent to close at ₹6,651. The rally was supported by a positive view from Citi, which named Divi’s its “top pick” in India’s pharma sector.
Citi said 2026 could mark an inflection year for Divi’s, driven by a strong pipeline and recovery in the generic segment. “The company has multiple pipeline catalysts over the next 12 months,” the brokerage noted, adding that it expects Divi’s revenue to expand threefold and EBITDA to rise fourfold over FY25–FY30.
Broad-Based Buying Lifts Large and Midcap Pharma Names
The rally was not limited to a few stocks. Lupin and IPCA Laboratories gained around 4 percent each, while Mankind Pharma, Glenmark Pharmaceuticals, and JB Chemicals & Pharmaceuticals rose over 2 percent.
Heavyweights such as Sun Pharmaceutical Industries, Torrent Pharmaceuticals, and Alkem Laboratories gained close to 2 percent, indicating broad-based participation in the rally.
Other stocks like Zydus Lifesciences, Wockhardt, and Abbott India advanced over 1 percent, reflecting renewed investor interest across market capitalisations.
Select Stocks Buck Trend as Investors Remain Discerning
Despite the upbeat sectoral mood, not all pharma stocks participated in the rally. Ajanta Pharma slipped around 2.5 percent, while Biocon and Gland Pharma fell about 1 percent each.
Analysts said this divergence highlights selective stock picking, with investors favouring companies offering clearer earnings visibility and exposure to the CRDMO and domestic formulations themes.
Outlook: Structural Tailwinds Keep Pharma in Focus
Market experts believe the outlook for Indian pharma remains constructive, supported by steady domestic demand, global outsourcing trends, and improving margin profiles. While short-term volatility cannot be ruled out, brokerages see the sector as well-placed for medium- to long-term growth.
As one analyst summed up, “The combination of IPM stability, CRDMO opportunity, and China-plus-one tailwinds makes Indian pharma structurally attractive, even as investors remain selective.”
With multiple positive triggers aligning, pharma stocks are likely to stay in focus as investors reassess the sector’s growth potential in a changing global healthcare landscape.
