All about Nifty Pharma

4.8

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In the past few years, the Indian pharmaceutical industry has grown by leaps and bounds. The COVID-19 pandemic has further accelerated investments and growth in the Indian pharma industry. With such a fast growing sector on our hands, it is imperative to have a benchmarking tool that’s capable of tracking and measuring the performance of the said sector. 

This is where the Nifty Pharma sectoral index comes into the picture. In this chapter, we’re going to be focusing on analyzing the index and its various constituents. Now, let’s get on with it.

What is the Nifty Pharma Index?

The Nifty Pharma Index is another sectoral index that consists of 10 of the largest companies in the pharmaceutical sector. These companies are involved in the discovery, development, manufacture, and subsequent sale of medicines and other drugs. In addition to using the index for benchmarking, Nifty Pharma is also used by fund houses for launching ETFs and mutual funds. 

What are the constituents of the Nifty Pharma index?

Here’s a tabular column that clearly lists out the various constituents of the Nifty Pharma Index along with their respective index weightage.

Name of the company 

Index weightage

Sun Pharmaceutical Industries

21.32%

Dr. Reddy’s Laboratories

17.85%

Divi’s Laboratories

14.23%

Cipla 

13.28%

Lupin

8.13%

Aurobindo Pharma

7.99%

Biocon

5.75%

Torrent Pharmaceuticals

3.96%

Alkem Laboratories

3.78%

Cadila Healthcare

3.70%

Let’s now take a brief look at these companies and their primary businesses. 

1. Sun Pharmaceutical Industries

  • Formed in 1983, Sun Pharmaceutical Industries is in the business of manufacturing, distributing, and selling drugs and pharmaceutical formulations.  
  • The company distributes its products both in India and the United States. 
  • Sun Pharmaceutical Industries has more than 40 manufacturing sites spread out throughout the entire world. 

2. Dr. Reddy’s Laboratories

  • Established in 1984, Dr. Reddy’s Laboratories is a pharmaceutical company based out of Telangana. 
  • The company’s product portfolio is extensive and includes generic drugs, over-the-counter (OTC) drugs, Active Pharmaceutical Ingredients (APIs), and differentiated formulations.

3. Divi’s Laboratories

  • Another pharmaceutical company based out of Telangana, Divi’s Laboratories was established in 1990. 
  • The company specializes in the production of nutraceutical ingredients, generic drugs, Active Pharmaceutical Ingredients (APIs), and other pharmaceutical intermediates.

4. Cipla

  • One of the most recognizable pharmaceutical companies in India, Cipla is a Mumbai-based entity that was established in 1935. 
  • The company manufactures several key drugs that are used in the treatment of a plethora of diseases and illnesses including arthritis, diabetes, depression, respiratory and cardiovascular disease, and even weight control. 
  • Cipla is present in around 9 different countries other than India. 

5. Lupin

  • Lupin is another Mumbai-based pharmaceutical company that was formed in 1968.
  • In terms of revenue generation, the company is one of the largest in the generic pharmaceuticals segment. 
  • Lupin’s focus is on over-the-counter drugs, APIs, biotech, and specialized drugs that are used to treat diseases like asthma, tuberculosis, and cardiovascular diseases.

6. Aurobindo Pharma

  • Aurobindo Pharma was established in 1986, with Hyderabad as its base of operations. 
  • The company manufactures both generic drugs and Active Pharmaceutical Ingredients. 
  • Aurobindo Pharma has a total of 10 formulation facilities - 8 of them are in India, 1 in the U.S.A, and 1 in Brazil. 

7. Biocon

  • In operation since 1978, Biocon is one of the largest pharmaceutical companies in India. 
  • The drugs and APIs manufactured by the company are distributed and sold in over 120 countries including India. 
  • Diabetes, oncology, and immunology are three of the key therapeutic areas that Biocon is currently operating in. 

8. Torrent Pharmaceuticals

  • Incorporated in 1959, Torrent Pharmaceuticals is a part of the Torrent Group of companies. 
  • The company has more than 8 manufacturing facilities - 7 in India and 1 in the U.S.A. 
  • In addition to manufacturing a wide variety of drugs, the company is also actively involved in research and development activities through its facility in Ahmedabad. 

9. Alkem Laboratories

  • Founded in 1973, Alkem Laboratories is a pharmaceutical company that’s headquartered in Mumbai. 
  • The company’s primary business areas are generic drugs, OTC drugs, vaccines, diagnostics, contact lenses, and even animal health. 
  • Alkem Laboratories is present in 10 different countries throughout the world apart from India. 

10. Cadila Healthcare

  • Founded in 1952, Cadila Healthcare is another major pharmaceutical company to have come out of Ahmedabad. 
  • The company is currently in the 100th position in the Fortune India 500 list for the year 2020. 
  • Cadila Healthcare has strong manufacturing and R&D facilities that are constantly working towards developing new drugs for combating deadly diseases. 

Trading in Nifty Pharma

As is the case with many of the sectoral indices, the National Stock Exchange hasn’t released any Nifty Pharma derivative contracts. This effectively means that you cannot trade in the index directly like you would for the Nifty Bank Index. That said, there are plenty of index mutual funds that are constructed with the same constituents as the Nifty Pharma Index with the intent to emulate their performance. 

S&P BSE Healthcare: The BSE alternative

Unlike Nifty Pharma, the BSE doesn’t feature a sectoral index that’s dedicated solely to pharmaceutical companies. Instead, it has the S&P BSE Healthcare index, which encompasses the entire healthcare sector as a whole. This includes pharmaceutical companies, healthcare equipment manufacturers, hospitals, and healthcare research institutions, among others. The BSE index has almost 68 companies, including the 10 pharmaceutical companies mentioned above.  

Wrapping up

That’s about it for this chapter on Nifty Pharma. In the next chapter, we’ll deal with another major sectoral index - Nifty Oil & Gas. Until then, sit tight and keep reading Smart Money!

A quick recap

  • The Nifty Pharma Index is another sectoral index that consists of 10 of the largest companies in the pharmaceutical sector.
  • The constituents of the Nifty Pharma Index are Sun Pharmaceutical Industries, Dr. Reddy’s Laboratories, Divi’s Laboratories, Cipla, Lupin, Aurobindo Pharma, Biocon, Torrent Pharmaceuticals, Alkem Laboratories and Cadila Healthcare.
  • As is the case with many of the sectoral indices, the National Stock Exchange hasn’t released any Nifty Pharma derivative contracts. 
  • Unlike Nifty Pharma, the BSE doesn’t feature a sectoral index that’s dedicated solely to pharmaceutical companies. 
  • Instead, it has the S&P BSE Healthcare index, which encompasses the entire healthcare sector as a whole. 
  • This includes pharmaceutical companies, healthcare equipment manufacturers, hospitals, and healthcare research institutions, among others. 
  • The BSE index has almost 68 companies, including the 10 pharmaceutical companies mentioned above.
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