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Government Policy Shocks and Stock Price Dynamics in Selected Leading Indian Pharmaceutical Companies: An Event-Study Analysis (2014–2025)

Rudra Prasad Dutta
Research Scholar in Commerce- Brainware University, Faculty-Finance & Financial Markets-FinX Institute
Limited(Formerly BSE Institute Limited), Howrah, West Bengal, India
Email: rudrapdutta@gmail.com
Niranjan Behara
Department of Commerce, Dr Gour Mohan Roy College, Purba Bardhaman, West Bengal, India
Email: behara.niranjan@gmail.com

Abstract
The Indian pharmaceutical industry has evolved into a globally significant sector, characterised by large-scale generic drug production, expanding export orientation, and increasing integration into global healthcare supply chains. Alongside market-driven forces, the sector has been subject to frequent and wide-ranging government policy interventions, including price regulation, industrial incentives, healthcare reforms, and crisis-driven regulatory actions. These policy initiatives, while primarily aimed at enhancing public health outcomes and strengthening domestic manufacturing capacity, also act as information shocks for financial markets. This study empirically examines the impact of major government policy shocks on the stock price dynamics of selected leading Indian pharmaceutical companies, Sun Pharmaceutical Industries Ltd, Divi’s Laboratories Ltd, and Cipla Ltd, during the period 2014 to 2025. Employing a standard event-study
methodology and using the NIFTY Pharma Index as a sectoral benchmark, the study analyses abnormal returns and cumulative abnormal returns surrounding key policy announcement dates. The findings reveal statistically significant short-term market reactions, with pronounced heterogeneity across firms. Such variation reflects differences in regulatory exposure, export dependence, research intensity, and strategic positioning within the pharmaceutical value chain. By combining firm-level stock market evidence with an evolving policy context, the study contributes to the literature on policy uncertainty and asset pricing in emerging markets. The results offer relevant insights for investors, policymakers, and corporate managers regarding how government interventions are perceived and priced in India’s pharmaceutical equity market.
Keywords: Government policy shocks, Event study, Indian pharmaceutical industry, Stock price dynamics, NIFTY Pharma Index