Nifty Pharma sits at record high, outperforms Nifty 50 with over 10% growth in one month; Divi’s Lab among top gainers

The Nifty Pharma index surged to an all-time high of 22,587.95 on Wednesday, August 21, and has outperformed the Nifty 50 benchmark, growing 10 per cent in the last month. Divi's Laboratories was the top gainer on the pharma index today and added 3.76 per cent on a report of a favourable US court ruling on a drug. Dr Reddy's Laboratories, Glenmark Pharma, Zydus Life, and IPCA Labs were up one-four per cent today and drove gains in the index.

According to domestic brokerages, the pharma sector has done well due to benign inputs, stable US prices and positive domestic demand. Rising for the fifth straight session, the NSE Nifty rose by 71.35 points or 0.29 per cent to end at 24,770.20 earlier today. The benchmark rose 0.98 per cent in the last one month, against the pharma index's 10 per cent rise. 

Also Read: Nifty’s valuation not at alarming levels; positive on defence, manufacturing, consumption: Deepak Shenoy of Capitalmind

Pharma sector in Q1FY25

The pharma sector performed well in Q1FY25, achieving double-digit YoY growth of 12 per cent in revenue, 20 per cent in EBITDA, and 23 per cent in net profit. The metrics exceeded D-Street expectations, as revenue came in two per cent higher and EBITDA and net profit surpassed estimates by 7.4 per cent and eight per cent, respectively.

Divi's Laboratories reported a consolidated net profit of ₹430 crore for the June 30, 2024 quarter. This was up 21 per cent over the ₹356 crore reported by the company in the year-ago period. The consolidated revenue from operations stood at ₹2,118 crore, up 19 per cent from ₹1,778 crore reported by the multinational major in the corresponding quarter of the last financial year.

According to domestic brokerage Prabhudas Lilladher, Divi's Laboratories continues to witness price erosion, which was negated by double-digit volume growth. Most of its projects are in the pipeline. The management of the pharma major cited that new generic opportunities emerged in FY26. 

The brokerage added that the pharma major is guided for ₹2.5-3 billion maintenance capex for FY25. The net cash stands at Rs42 billion, and management remains confident about double-digit revenue growth in the medium term. Logistics challenges persist, leading to increased freight costs and transit time. Asset turnover is expected to touch 1.1x in FY26.
 

Also Read: ’Amazon investment won’t support Indian economy’: Piyush Goyal flags ‘predatory price’ risks for local retailers
 

Stock market today: Nifty 50 rises for fifth straight session

The domestic market ended with gains on Wednesday, tracking largely positive global cues ahead of the Jackson Hole Economic Symposium. In the last five sessions of gains, the Nifty 50 has risen about 2.6 per cent. Expectations are high that US Fed Chair Jerome Powell will provide clear hints about the trajectory of rate cuts, which are anticipated to begin in September.

Analysts said that the upbeat US stock market also supported Indian stocks. US markets have rallied for over a week, recovering over $3 trillion of market cap from the August low. This year, the US Federal Reserve's Jackson Hole Economic Symposium, which is an annual conference, will be held from August 22 to 24. Powell is expected to speak at the conference on Friday.

"The Indian market traded on a tight range with a positive bias supported by strong DII flows. The defensive sector outperformed due to a continued shift in portfolio towards FMCG, consumer, commodities, and pharma. Global markets exhibited a mildly cautious tone ahead of the release of the FOMC minutes later today. The expectation of a rate cut remains high, given the fall in US inflation and moderation in overall growth,'' said Vinod Nair, Head of Research, Geojit Financial Services.
 

Also Read: Cyient approves sale of 14.50% stake worth 1.15 crore shares in Cyient DLM via block deal
 

Nifty 50 Outlook

D-Street experts said following a flat start, the Nifty traded within a narrow range but saw selective buying in the final hour, pushing the index to close near the day’s high at 24,770. The sectoral trend remained mixed, with FMCG, pharma, and metal sectors posting decent gains, while profit-taking in banking and financial majors limited the upside. 

Buoyancy in the small-cap space contributed to positive market breadth, settling on the advancing side. Rotational buying in heavyweights across sectors is aiding the index's gradual climb, though inconsistency in the banking majors keeps participants cautious. 

‘’On the index front, Nifty may pause around 24,850 before moving towards the 25,000+ level. In the event of a dip, we expect the index to find support in the 24,450-24,600 zone. In addition to domestic factors, we recommend closely monitoring the US markets for further cues,'' said Ajit Mishra – SVP, Research, Religare Broking Ltd.

Disclaimer: The views and recommendations provided in this analysis are those of individual analysts or broking companies, not Mint. We strongly advise investors to consult with certified experts before making any investment decisions, as market conditions can change rapidly and individual circumstances may vary.