Pharmaceutical stocks emerged as the strongest pocket of the market on Tuesday, accounting for the top three gainers on the Nifty 50 and dominating the BSE Midcap top gainers list. The Nifty Pharma index rose nearly 2 percent, even as benchmark indices traded largely flat in early deals.

At 09:39 hrs IST, the Nifty Pharma index was up 1.88 percent, making it the best-performing sectoral index on the NSE by a wide margin. In comparison, the Nifty 50 and the BSE Sensex were up just about 0.05 percent.

Dr Reddy's Laboratories led the gains on the Nifty, rising 2.64 percent to Rs 1,324.80. Sun Pharmaceutical Industries advanced 1.68 percent to Rs 1,894.20, while Cipla gained 1.22 percent to Rs 1,433, making pharma stocks the top three performers on the benchmark index.

The strength was visible across the broader healthcare space as well. On the BSE Midcap index, pharmaceutical names dominated the gainers' list, with Emcure Pharmaceuticals surging 5.37 percent. Laurus Labs, Gland Pharma, Aurobindo Pharma, Alkem Laboratories and Ipca Laboratories were also among the top advancing midcap stocks, meaning six pharma companies featured among the index's top gainers.

The rally comes amid reports that the US Food and Drug Administration (US FDA) has approached Indian drugmakers to help address a shortage of ifosfamide injection, a generic chemotherapy treatment used for several cancers, including testicular, bladder and lung cancer.

According to media reports, the regulator has reached out through the Indian Drug Manufacturers' Association (IDMA) to identify companies capable of supplying the drug immediately. Many of the Indian pharmaceutical manufacturers have a strong presence in the global generics market and longstanding relationships with US healthcare providers.

Brokerage support has also aided sentiment. Cipla shares had rallied more than 4 percent in the previous session after Citi reiterated its 'Buy' rating and placed the stock on a 90-day positive catalyst watch. The brokerage maintained a target price of Rs 1,700 per share and highlighted potential triggers including a rebound in the company's US business, possible approval for  gFlovent, the launch of gVentolin and opportunities in Nintedanib.

Separately, Dr Reddy's gained after Nomura reiterated its bullish stance on the stock. The brokerage maintained a 'Buy' rating and a target price of Rs 1,740 per share, implying an upside potential of around 37 percent from the previous close. Nomura said the company's increasing focus on branded generics and consumer healthcare, along with management restructuring and portfolio acquisitions, could support earnings growth and valuation re-rating over the medium term.