Pharma Stocks Buzzing As FY26 Outlook Turns Positive

Pharmaceutical stocks are back in action. Since May 8, the NSE Nifty Pharma index has risen 2.8%, with a 1.33% gain over the last five trading sessions.

The rally is being fuelled by solid quarterly results and a string of optimistic fiscal 2026 outlooks from leading drugmakers.

Among the key gainers are Torrent Pharmaceuticals, Gland Pharma, Mankind Pharma, Dr. Reddy's Laboratories, and Sun Pharma, which have all posted results in line with expectations. Divi's Laboratories, in fact, beat estimates. Brokerages have taken note, with many turning bullish on the sector's prospects this financial year.

Dr. Reddy's has issued guidance for double-digit growth with margins north of 25%. Divi's Labs expects double-digit revenue growth, and Gland Pharma is looking at mid-teens growth.

India Ratings anticipates 7-8% annual growth for IPM in the current fiscal, with growth expected to be fuelled by chronic therapies, price increases, and new product launches.

"Pharma stocks have been correcting for quite a while and have just started to pull back," said Vishal Manchanda, senior vice-president of institutional research at Systematix Shares and Stocks (India).

One tailwind, he pointed out, is the US decision to keep generic drugs out of its pricing policy — offering Indian exporters some relief from further pricing pressure in the "Most Favoured Nation" policy. "Tariff overhangs still exist, but this helps," he added.

While the near-term looks upbeat, there are concerns further out. Fiscal 2027 may not see many high-value drug launches, with visibility fading, said Manchanda. Sun Pharma's potential price reductions could also impact the sector, depending on the scope. "If they restrict it to the top 100 or 200 drugs, we might even see Sun Pharma drop out of the list," Manchanda noted.

As for contract development and manufacturing players, India's cost competitiveness remains key. "Some pricing pressure will be there, but volume should take care of that," he said.

The US' focus on domestic production will benefit CDMOs by leveraging India's cost advantages and chemistry expertise. The company's expected to be benefitted most include Divi's Labs, Laurus Labs, Syngene International, and Neuland Labs.