Sun. May 26th, 2024

Pharma stocks, as they have a low Beta, are known to perform relatively better in a stock market correction. We’re going to help you understand why.

What is Nifty Pharma?

Nifty Pharma is an index of companies manufacturing drugs and pharmaceuticals in India. Nifty Pharma offers a defensive play in the current down-trending market. 

Nifty Pharma stocks came into the limelight when they started manufacturing generic drugs for most branded drugs. They also gained approval from the FDA and EU and UK healthcare regulators to supply in these markets.

It is also true that Nifty pharma stocks languished in the last few years because of unplanned diversification, more negative FDA commentary, etc. The COVID-19 epidemic brought these stocks to the forefront, especially because of the development of the vaccine and other medications. 

List of Top 5 Pharma Stocks

Here is a list of stocks leading the pharma sector in India which are constituents of the Nifty Pharma Index.

NameTickerMarket Cap Rs Crores
Aurobindo PharmaAUROPHARMA32,024
Cadila HealthcareZYDUSLIFE37,622
Divis LaboratoriesDIVISLAB97,065
Dr Reddy’s LaboratoriesDRREDDY72,176

Aurobindo Pharma: 

It is a leading generic player in the U.S and European markets. Aurobindo enjoys strong growth prospects in the US markets because of its dominant presence in the injectables space. It also has a portfolio of other diversified products in the global markets. 

The recent clearance of the USFDA overhang on its injectables units and better growth prospects in Europe. Aurobindo’s product portfolio focuses on biosimilars, oncology inhalers, and transdermal patches. 

The stock is available at a Price/Earnings ratio of 11.45 and a Price/Book ratio of 1.24 at a current market price of Rs. 517.5.

Cadila Healthcare: 

Cadila, also known as Zydus Life sciences, is a fully integrated healthcare provider based in Gujarat. 

It is one of the top three players in Oncology, Respiratory pain, and Gynaecology and the fourth-largest player in India’s pharmaceutical industry. It has a 50:50 partnership with Takeda and Pfizer and a 75: 25 partnership with Bayer. 

It is growing at a compound annual growth rate of 18% p.a. It also has 37 plants globally. This stock is available at a Price/Earnings of 7.9 times and a Price/Book of 1.86.


Cipla has a strong domestic presence in the Indian market. The approval of the drug Albuterol for Covid-19 treatment in the US markets has gained it a foothold in the US market. 

Cipla mainly focuses on chronic medications, especially respiratory medicines. It has also undertaken several cost-cutting measures in the recent past. 

Cipla is available at a Price/earnings ratio of 29.92, a price/Book of 3.57, and a current market price of Rs. 933.35.

Divis Laboratories: 

It is one of India’s largest Contract Research and manufacturing services players. The company has been ramping up its Capex and also completed backward integration. It is one of the authorized manufacturers of Molnupiravir, a Covid-19 treatment drug. 

It enjoys a return on capital employed of 32% p.a. and a return on equity of 24% p.a. for the past five years. It has a current Price/earnings ratio of 32.88 and a price-to-book ratio of 8.30 with a current market price of Rs 3,666.3.

Dr Reddy’s Laboratories: 

This is one of India’s top generics players focusing on the Indian, Russian and Chinese markets. It is a global player with a significant US and non-US presence. The company has also executed several cost-cutting measures. 

The company has registered a compound annual growth rate in revenue of 10% p.a. and profit of 30% over the past five years. The company reported a Price/Earnings ratio of 32.75 times, a price/book ratio of 3.72 times, and a current market price of Rs. 4,294.90.

Key Takeaways 

Nifty Pharma stocks segment is among the  different sectors which offer  portfolio diversification opportunities. They are defensive stocks known to enjoy low correlations to the index. In falling markets, they help to reduce the volatility of the portfolio. Do your research before investing in the pharma sector through your online investing platform.

By Manali