The Indian equity market recorded its biggest weekly fall in more than two years. The Nifty and Sensex fell over 4% each, marking their steepest decline since June 2022. The Nifty Bank index slid 5%, while the Midcap index declined nearly 4% this week.

All BSE-listed companies erased a market capitalisation of ₹19 lakh crore this week.

Expect pharma, all sectoral indices posted losses, with PSU Bank, PSU, and Metal indices being the top losers, each down 6%.

As many as 48 out of 50 Nifty stocks delivered negative returns, with 30 stocks falling over 5%. Only two Nifty stocks—Dr. Reddy’s Laboratories Ltd and Cipla Ltd—recorded gains this week.

Dr Reddy’s Laboratories was recently upgraded by Nomura, with a price target of ₹1,500 per share.

Nomura believes concerns about the high contribution of Revlimid have already been priced in. In the first half of the 2024-25 fiscal year, a large part of the company’s growth was driven by initiatives, including clinical trials for biosimilars.

The brokerage highlighted that Dr. Reddy’s Laboratories has significantly increased investments in manufacturing infrastructure, with its capex more than doubling in FY25. Moreover, the potential upside from GLP-1 and biosimilars has not been fully accounted for in FY27 estimates.

Meanwhile, Cipla was upgraded to a ‘buy’ rating by Kotak Institutional Equities from its previous ‘add’ rating. The upgrade was driven by reasonable valuations, a series of upcoming US launches, expectations of domestic recovery, and strong growth in South Korea.

Kotak has set a price target of ₹1,725 for the stock.

The brokerage noted that Cipla’s recent stock correction, caused by factors such as concerns about a potential pre-approval inspection (PAI) for its blockbuster cancer drug Abraxane, a subdued Q3 outlook due to transient issues, and the promoter stake sale, has made valuations more reasonable. Cipla’s shares have declined over 12% in the past three months.

While there remains a possibility of a PAI for Abraxane, which could delay its launch beyond FY25, Kotak remains optimistic about the drug’s potential. They project US sales for Abraxane at $30 million in FY26 and $41 million in FY27. Additionally, the recent clearance of Cipla’s Goa facility, where Abraxane is to be manufactured, adds to their confidence.

Kotak also said that Cipla’s upcoming US launches as a solid growth driver, even with the impending patent expiry of another blockbuster cancer drug, Revlimid.

In the domestic market, Cipla has gained market share in the respiratory segment over the past 1.5 years. However, a slow seasonal uptick has temporarily impacted therapy growth, which may slightly affect domestic performance in Q3FY25. The brokerage views these challenges as transient and driven by seasonal factors. They expect a gradual recovery in domestic growth, supported by an increasing chronic mix and improved productivity, projecting a 9% CAGR for India sales over FY24-27.

Given these expectations, Kotak is optimistic about Cipla’s prospects, believing that most concerns are already reflected in the current stock price.

Shares of Dr. Reddy’s Laboratories ended 1.49% higher on Friday at ₹1,345.30, while Cipla settled 2% lower at ₹1,476.40.