Pharma and IT stocks are facing pressure at the moment, leaving investors wondering how to position their portfolios. With the US announcing fresh tariffs on branded drugs and uncertainty around H-1B visa rules, both sectors are experiencing headwinds.
Experts suggest a careful approach with a focus on companies better placed to handle the current challenges.
PHARMA: DOMESTIC PLAYERS LOOK STRONGER
Sudip Bandyopadhyay, Group Chairman of Inditrade Capital, said investors should look at Indian companies with a strong domestic presence.
“I’ve been saying that the domestic pharma industry is growing at 25% CAGR. Focus on companies having significant domestic business. I have been talking about Mankind Pharma and some of the other companies with strong domestic exposure. Till things settle down as far as the US is concerned, these companies look better placed,” he said.
Indian pharma companies that depend heavily on the US market are facing risks after President Donald Trump announced a 100% tariff on branded and patented drugs. While Indian firms are more active in the generic drugs segment, analysts believe companies engaged in contract development and manufacturing (CDMO) could see pressure if clients shift more work to the US.
“There will be impacts here and there, but the primary impact will not be much at this stage. CDMO players may be in for some trouble in terms of future business and contract renewals. Other than that, Indian pharma to a great extent is sheltered, because they are not into branded products so much,” Bandyopadhyay explained.
He also pointed out that it remains unclear how these tariffs will interact with existing agreements such as the US-EU treaty, which currently caps tariffs at 15%. “Things have to mature before we can get a firm view. But by and large, Indian pharma looks, to an extent, safe at this stage,” he added.
IT: MID-CAPS OFFER GROWTH, LARGE CAPS FACE PRESSURE
In the IT sector, Bandyopadhyay highlighted the opportunity in mid-cap companies that are part of the global shift from internal combustion engines to electric vehicles.
“There is a massive transition happening in the automobile industry from ICE to EV. This requires a lot of technology support, and Indian mid-cap IT companies are providing that technology backbone, whether it’s Tata Technologies, Persistent Systems or others. The scope is huge and expanding globally,” he said.
However, large-cap IT companies face margin pressure as artificial intelligence becomes more important in service delivery. “AI is real. US corporates will insist on using AI to deliver services, which will eat into the margins of Indian IT companies. Maintaining and improving margins will be a challenge for large-cap IT firms providing general IT services,” Bandyopadhyay noted.
WHAT INVESTORS SHOULD DO
Experts suggest a balanced approach:
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In pharma, focus on domestic-oriented players for stability while keeping an eye on regulatory changes in the US.
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In IT, look at mid-cap firms providing specialised technology services, especially in areas linked to EVs and automation.
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Be cautious with large-cap IT firms until there is more clarity on how AI adoption will affect pricing and profitability.
While uncertainty remains, both sectors still offer opportunities for investors who choose selectively and take a long-term view.
(Disclaimer: The views, opinions, recommendations, and suggestions expressed by experts/brokerages in this article are their own and do not reflect the views of the India Today Group. It is advisable to consult a qualified broker or financial advisor before making any actual investment or trading choices.)
