ICICI Direct remains optimistic about India’s pharmaceutical space, favouring domestic formulations, hospital operators, and CRAMS businesses, while cautioning on generic-drug makers amid sector resilience.
ICICI Direct remains constructive on India’s pharmaceutical space, but only selectively. After a strong run in pharma shares, the brokerage says the better opportunities now lie in domestic formulations, hospital operators and contract development and manufacturing businesses, rather than in a broad chase across the sector. The call comes as pharmaceutical stocks have continued to show resilience even when the wider market has been weak, underscoring how investors are still treating the sector as a defensive growth play. According to ICICI Direct, that preference is tied to earnings visibility and steadier execution rather than short-term momentum.
The firm’s research head, Pankaj Pandey, said on Business Today that domestic formulations continue to look attractive because industry growth remains robust and large companies are executing well. ICICI Direct pegs the broader domestic pharma market growth at around 12%, while citing Torrent Pharmaceuticals as an example of a large-cap name delivering 13% to 14% growth with healthy margins. Among mid- and small-cap names, the brokerage prefers Ajanta Pharma and RPG Life Sciences. Pandey said RPG Life Sciences stands out because of an estimated growth path of about 16%, strong margins, plans to expand its active pharmaceutical ingredient portfolio and its domestic market exposure.
ICICI Direct is also positive on hospital stocks, describing the segment as an enduring growth area. The argument is that hospitals offer steady demand, pricing power and less earnings volatility than export-heavy drug makers. In that space, the brokerage favours Global Health, Rainbow Children’s Medicare and KIMS. Reuters-style market reporting has also shown pharma stocks holding up well, with the Nifty Pharma index gaining even on days when broader sentiment was softer, reflecting investor appetite for businesses with more predictable demand.
By contrast, ICICI Direct is more cautious on generic-drug makers, especially companies heavily exposed to standard and complex generics, where recent trading has been more erratic. It sees more selective upside in CDMO names, despite the sector already having rallied sharply. Pandey pointed to Laurus Labs’ recent results as solid and said Piramal Pharma’s outlook has improved as some of the pressure it faced over the past year has eased. That broader caution is in line with ICICI Direct’s other research, which has also highlighted India’s formulations theme and the CRAMS/CDMO opportunity while noting that valuations and business mix matter more than blanket exposure to pharma.
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