Gland Pharma to Biocon: Pharma stocks rally up to 27% in a month: Can they shield portfolio from US-Iran war-led risks?

Pharma stocks have staged a strong rally this year, defying broader weakness in the Indian stock market amid rising geopolitical tensions stemming from the US-Iran war in the Middle East.

The Nifty Pharma index has surged nearly 11% over the past month, significantly outperforming the Nifty 50, which declined 3.6% during the same period. On a year-to-date (YTD) basis, the Nifty Pharma index has gained 9.4%, while the benchmark Nifty 50 has fallen by an equal margin.

The pharma sector has also outperformed most peers, many of which remain under pressure due to global headwinds, elevated energy prices, and subdued earnings growth.

Pharma stocks outperform broader market

With the exception of two constituents, all stocks in the Nifty Pharma index posted positive returns over the past month.

Gland Pharma emerged as the top performer, rallying over 27%, followed by Laurus Labs and Biocon, which gained 21–23%.

Shares of Ajanta Pharma, Cipla, Mankind Pharma, Granules India, Sun Pharmaceutical Industries, Zydus Lifesciences, and JB Chemicals & Pharmaceuticals advanced between 10% and 15%.

Torrent Pharmaceuticals, Divi’s Laboratories, Dr Reddy’s Laboratories, Abbott India, Ipca Laboratories, Aurobindo Pharma, Natco Pharma, and Glenmark Pharmaceuticals shares rose between 6% and 10%.

The only laggards in the Nifty Pharma index were Lupin, whose shares declined 0.57%, and Alkem Laboratories, which fell 2.91%.

Why are pharma stocks outperforming?

The recent rally in pharma stocks has been driven by a combination of stronger-than-expected quarterly earnings, rupee depreciation, and an improving business outlook across companies.

“Nifty Pharma has witnessed a strong rally over the last month, outperforming several sectors despite broader market volatility. The rise has been driven by a mix of better-than-expected quarterly numbers, a weaker rupee, and improving business prospects across pharmaceutical companies,” said Dr. Ravi Singh, Chief Research Officer, Master Capital Services.

He added that since several Indian pharmaceutical companies derive a significant share of revenues from overseas markets, a weaker rupee has strengthened earnings expectations.

According to Maitri Sheth, Pharma Analyst at Choice Institutional Equities, pharmaceutical companies have reported better-than-expected Q4 and FY26 performance in both revenue and margins, aided by specialty launches, an improving chronic portfolio mix, and sustained demand trends.

“We expect this momentum to continue for the remaining companies as well,” Sheth said.

Singh echoed similar views, noting that Q4 performance across the sector remained healthy, particularly for companies with exposure to specialty drugs, contract manufacturing, and export-oriented businesses.

“Margin improvement and stronger profitability have also helped boost investor sentiment. However, the performance has not been uniform, as some companies delivered stronger numbers than others. Overall, the sector still looks fundamentally stable,” he said.

He further noted that healthcare demand remains relatively resilient, while earnings visibility appears stronger than in many cyclical sectors. Going forward, stock-specific selection is likely to play a bigger role than broad-based sector momentum.

Can pharma stocks protect portfolios during a war-led selloff?

Pharma stocks have historically been viewed as a defensive play during periods of uncertainty, given that healthcare demand tends to remain stable irrespective of economic cycles or geopolitical disruptions, such as the prevailing US-Iran war.

“People continue to spend on medicines and healthcare even during challenging periods, which gives the sector a defensive character. Recent market trends have reflected this resilience. While concerns around global tensions, rising crude oil prices, and broader market weakness impacted several sectors, pharma stocks continued to attract investor interest,” Singh said.

Another supportive factor for the sector is currency movement. A weaker rupee generally benefits export-focused pharmaceutical companies, as overseas revenues translate into stronger earnings.

However, Singh cautioned investors against viewing pharma as a complete hedge against market corrections.

“Pharma can help reduce portfolio volatility and provide stability during uncertain periods, but no sector is entirely insulated from broad market pressures. The sector works best as a balancing component within a diversified portfolio rather than as a standalone shield,” he said.

In an increasingly uncertain macroeconomic and geopolitical environment, Sheth believes pharma remains among the strongest defensive sectors due to its non-cyclical demand profile.

“While some pressure on margins and profitability may arise from higher raw material costs and supply chain disruptions, the impact is expected to remain manageable, as recent product launches are concentrated in high-margin segments such as biosimilars, oncology, and peptides,” Sheth said.

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Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.