Pharma companies are likely to gain from domestic healthcare demand in the July‑September quarter (Q2) of FY27, despite pricing pressure from the US generics market and elevated logistical costs caused by geopolitical conflict. Analysts predict resilient performance for firms such as Zydus Life, Sun Pharma, Dr Reddy’s, and Torrent Pharma, as domestic formulations, new launches and chronic therapies drive growth. The sector is expected to benefit from strengthened manufacturing capabilities and CDMO segment expansion, offsetting a projected decline in the US export business.

The export business to the United States is estimated to decline 15% year‑on‑year in Q2 earnings, largely due to lower sales and continued price pressure in the select generics market. However, the United States has exempted certain speciality drugs imported from 20 countries, including India, from its 100% import duty rate, providing significant relief to eligible Indian drugmakers. This exemption is expected to support revenue growth in the primary export market for domestic pharmaceutical companies.

NSE data shows the Nifty Pharma index has outperformed the benchmark NIFTY50, gaining 1.6%, while the broader index declined more than 6% in the last three months due to weak global cues for the Indian market. The Indian rupee has weakened by about 6% against the US dollar this year, which is beneficial for pharmaceutical companies with the US as a major market for drug imports, adding support to overall revenue growth in the period under review.

Antique Broking analysts expect the pharma sector to post earnings growth in Q2 FY27, led by domestic formulations, new launches and sustained outperformance in chronic therapies. Near‑term headwinds include elevated costs, pricing pressure in the US market, regulatory scrutiny and potential impact of elevated input and logistics costs. Companies such as Cipla, Dr Reddy’s and Zydus Life are expected to witness overall margin contraction, while Torrent Pharma may see margin growth.

Aparna Shanker, CIO‑Equity at The Wealth Company Mutual Fund, highlighted the large medium‑to‑long‑term opportunity in the Indian pharma sector, with domestic companies expanding capabilities across complex generics, speciality medicines and CDMOs. She noted that the CDMO segment is particularly promising as global pharmaceutical companies diversify supply chains and outsource development and manufacturing to capable partners, positioning Indian companies to benefit from this shift.

Investors should focus on key indicators beyond regular quarterly numbers, including domestic formulation growth, product pipeline, contribution from complex generics and speciality products, and recovery pace in the US market. Order inflows, customer additions, capacity utilisation, revenue visibility and conversion of development projects into commercial manufacturing will be critical factors to watch in the upcoming Q2 earnings of pharma companies.