The Indian pharmaceutical market is set to see slower growth in the March quarter, continuing a trend that was visible in the December quarter. Though major Indian drug makers get a large part of their sales from overseas markets, India nevertheless forms a sizeable part of their revenue.

There is one caveat, though. Typically, there is a variance seen in the reported performance of companies from the market data that is reported. One reason is that market data reports actual sales to consumers whereas companies report sales to their distributors. While actual growth rates may vary, the trend should be visible in reported numbers as well.

In February, the domestic market grew 7.4% which is lower than the January growth figure of 9.8%, according to a research report by Karvy Stock Broking Ltd. In the 12 months to February, the market growth was 13%.

The key segment that is contributing to the slowdown appears to be anti-infectives—the largest segment by revenue—with sales growth down to 5.1% in February. This segment has been a laggard compared with the overall market even in the past, and its size is such that it tends to affect overall growth. Other segments such as anti-diabetic, cardiac, gastro-intestinal, neurology and vitamins have done better than the anti-infective segment, but are also seeing slower growth compared with past trends.

The impact of slower growth will be felt more by multinational companies because their exposure is chiefly to the domestic market. Indian companies, however, get a key part of their revenue from selling drugs in the US, Europe and other emerging markets. The impact on these companies of slowing domestic growth will be relatively less. So, the impact on these companies will be to the extent of contribution to revenue. Also, as mentioned earlier, the impact on reported performance may not be uniform.

That is reflected in investor reaction to slower market growth. The S&P BSE Healthcare Index has fallen 1% in 2013 so far, but has done better than the broader market which has declined by 1.5%. With domestic markets likely to underperform, any drop in growth in other key overseas markets may be viewed negatively by the Street.

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