, Head of Institutional Equities, , says market movement is expected to be limited in the coming quarter. Headwinds will create a cooling period before buying resumes. Upside potential is capped, while downside risk is protected. The pharma sector faces challenges in FY26 due to normalizing tailwinds and US trade tariffs. A neutral stance is advised, but JB, Ajanta, Cipla and Torrent are favoured.
Well, the risk-off keeps happening every now and then. You had a risk-off happening in the first week of April and then tariffs went back, 90-day window opened, and we went back into risk-on. But over the last 8-10 weeks, we have not really had any decisive move in the market and we believe it will continue to be the case for the next quarter maybe. Headwinds will play out.

There will be a cool-off period and then, people will come in to buy. But the upside is very clearly capped. The downside is protected, unless you get to see a very decisive mood either a significant earnings upgrade or a significant earnings downgrade, we are locked in a very narrow range on the market which may persist even for the second half of the year. That is the feeling we are now beginning to align.

Amit Khurana: I do not think I can make a call for a decade but largely the pipeline seems pretty healthy. The launches are back, which was a concern last year because the launch pipeline had dried up. That is back and as you get more and more launch pipeline, it extrapolates the visibility that you have on cash flows. The important thing is how these companies deploy these fresh cash flows into newer projects and what are the sort of ROEs that one can build on these new assets that they are acquiring. So far, the trend seems to be on the positive side and largely more on the positive side. Stock specific, I cannot talk because we do not have ratings on the stocks per se there.

What is your take on some of these pharma counters? We have seen a lot of regulatory action coming in from USFDA on the likes of Sun Pharma. There was Alembic last week. Today there is news flow on Granules wherein their Telangana facility, which makes paracetamol, has received one Form 483 observation. Which companies are you liking in pharma?
Amit Khurana: For pharma, FY26 will be more of a consolidation year and the reason we say that is during FY24 and FY25, we had significant tailwinds which helped the sector to outperform by a wide margin versus the broader market. You had significant earnings operating leverage playing out. You also had new launches which provided the tailwind.

This year you have a lot of those factors normalising and then also this overhang of the US trade tariffs which will ultimately have some dent on the likely upside that you can see. I am not trying to sound bearish on pharma, but we have been more on the neutral mode. We continue to like JB, and we like Ajanta among small and midcap plays. On the largecaps, we are more aligned to Cipla and Torrent at this stage. But in terms of expectations of returns that we are building in, they are relatively muted and even the intuitive sense would have been in an environment wherein you want to be risk-off pharma thinking it will be defensive.

That is also no longer the case because supply chains are getting impacted, logistics costs going up. We have seen how it played out in FY23 when the Ukraine war happened. The sector is facing challenges in spite of being a good cash flow generator. We are more on the neutral mode, but we like some of the individual names there and I would probably keep my expectations slightly muted on the FY26 returns from the sector.