Stocks down again — but what are the outliers in India’s share market slide?

On Tuesday, India's two primary stock indices the Sensex and Nifty fell almost 1% in the initial hour of trading, continuing Monday's decline of 1.5-1.6%. Despite the overall market slide, certain sectors are showing promise. Pharmaceutical firms, particularly contract development and manufacturing organizations (CDMOs), have been thriving.

These companies, such as Divi’s Laboratories, Laurus Labs, and Gland Pharma, have seen significant gains over the past few months. The surge in the pharmaceutical sector is attributed to a new act passed in the US that encourages American pharma companies to seek alternative sources for active pharmaceutical ingredients (APIs), shifting towards Indian CDMOs.

This is further bolstered by a weaker rupee, which benefits CDMOs that rely heavily on exports. Additionally, Indian pharmaceutical companies are gearing up to manufacture semaglutides, a generic version of popular drugs, taking advantage of the market boom post-Novartis' patent expiration.

In the tech sector, shares of companies involved in AI infrastructure have continued to soar. E2E Networks, which provides cloud infrastructure for data centers, has seen its share price more than triple this year. Sterlite Technologies, known for manufacturing optical cables, has surged almost eight times. Other companies like Syrma SGS and Avalon Technologies, which produce electrical components and printed circuit boards used in chips, have more than doubled in value this year.

While the long-term viability of this AI investment boom remains uncertain, the demand for data centers continues to rise, providing substantial business for those involved in building them.

The Indian stock market has largely been impacted by large and mid-cap stocks, with small-cap companies showing more resilience. Analysts attribute this to the limited upside potential of large-cap stocks and faster earnings growth in smaller companies. For instance, metal pipes and other metal products maker Welspun Corp has more than tripled this year, while electric vehicle manufacturer Ather Energy has doubled.

Similarly, Redington and Sona BLW Forgings have seen more than a 50% increase. The robust IPO market has also contributed to this trend, as a staggering Rs 10.1 lakh crore was raised through public markets between April 2023 and September 2026. This increased liquidity has diverted some of the funds away from the secondary market, contributing to the subdued performance of some stocks.