Sep 20, 2018


As you can see in the given Weekly chart, the NIFTY PHARMA INDEX surged almost 100% from about 7000 to about 14000 levels in one year from may 2014 to may 2015, and since then has been languishing and correcting or in a bear market with declines of almost 50% in most frontline stocks excepting individual performances in mostly midcap companies (such as Biocon, Natco etc.).
With its, present upsurge of about last 3-6 months, it has managed to cross 100 DMA swiftly and now come at 200 DMA. Right now around 10500. The RSI situation is also looking oversold. It looks highly unlikely that the Index which has risen 20% in past 4 months . Also, if the index continues its upsurge and go about towards its 14000 peak, then it will almost be like a vertical rise. It will be like covering 3 years of bear market decline in less than one year. Can this happen? Yes, anything can happen in stock market; but for that a lot of things has to happen, that too negative. Lets look at it this way. The pharma Index' outperformance is not absolute and without reason. It is coincided with the underperformance or rather decline in the market and the broader sector during this entire year. The fall in currency has been pivotal in outperformance by this pharma and IT stocks which are so called 'defensive' in stock market terms.  
In conclusion, we can say that, if the broader market continue to languish through the election in 2019 which is still 10 months far, then the 'defensive' card can turn the pharma sector into further outperformance and the investing and speculative buying can boost the index to its life time highs of 14000.  
Now, the actual technical analysis as given here mentioning the weekly chart, is that a bearish evening star pattern has been formed and we might not see continuation of the recent upsurge continue on immediate basis. However, if the index consolidates in this 10000 and 10500 range and then starts fresh upmove then the above forecasting of it scaling peak can not be ruled out.  It should also be kept in mind that pharma has diverse stock selection in terms of largecap, midcap and smallcap. So selection of stocks will also matter in your trading strategy as the index comprise of 10 stocks only. We have already been mentioning to remain upbeat on this sector since last few months and it has played out quite well with proper trading strategy keeping in mind the stock selection and overall market movement.

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