Sector in Focus – Nifty Pharma
By Brijesh Bhatia (bbrijesh9)
Pune, 18th December 2024: The Nifty50 index has witnessed a remarkable rebound from a low of 23,300 to a level of 24,700. The index is hovering in the 24,200-24,600 zone, indicating some consolidation after the sharp rally. While the long-term trend remains bullish, the daily and weekly charts suggest a temporary lack of momentum. This brings us to an intriguing sector to watch closely—the Nifty Pharma Index.
Nifty50 – Bullish Long-Term Outlook, but Short-Term Lacks Momentum
In the context of the broader Nifty50, the bullish trend appears intact, especially on the monthly chart, which suggests that the uptrend is likely to continue in the long term. However, the daily and weekly charts display signs of exhaustion or consolidation, with lower momentum and mixed signals on key indicators like the Relative Strength Index (RSI).
Source: TradePoint, Definedge
Our Bold Bulls strategy uses a unique approach to using RSI. Rather than looking for overbought or oversold conditions, we focus on identifying stocks with RSI levels consistently above 60. This suggests the stock or sector is in strong bullish momentum, aligned with the trend. Our strategy emphasises riding the wave of the trend rather than predicting reversals, which can often be more volatile and difficult to time.
In RZone, we use multi-timeframe analysis to comprehensively view the trend, momentum, and price action. This approach helps us identify stocks with a clear bullish trajectory across daily, weekly, and monthly charts. The focus of our analysis now shifts to the Nifty Pharma index.
Nifty Pharma Index
Source: TradePoint, Definedge
The Nifty Pharma index has recently broken out of a symmetrical triangle pattern on its daily chart, which suggests potential for further upward movement. This breakout indicates that the index will likely trend northwards, supported by strong technical momentum.
Interestingly, the zone between the 62EMA (Exponential Moving Average) and 200EMA has acted as a significant demand zone for the Nifty Pharma index. Currently, the 62EMA channel is placed between 22,518 and 22,209 levels. A decisive break above the 22,520 level will likely confirm the bullish momentum and could trigger further buying in the sector. Currently, the index is trading around the 22,400 level, and its next key resistance point is near the aforementioned 22,520 level.
Given this backdrop, let us turn our attention to the individual stocks identified through the Bold Bulls strategy.
To identify potential winners, we ran a multi-timeframe scan to find stocks from the Nifty Pharma index whose RSI is consistently above 60 on the daily, weekly, and monthly charts. This strategy ensures that we focus on stocks exhibiting strong and consistent bullish momentum across multiple timeframes. Out of the 20 stocks listed in the Nifty Pharma index, only two stocks meet these criteria.
- Torrent Pharma
Torrent Pharmaceuticals is one of India’s leading pharmaceutical companies, renowned for its high-quality medicines in therapeutic segments like cardiovascular, central nervous system, and gastroenterology. The company has a strong presence in the Indian market and an expanding footprint internationally, particularly in the U.S. and Europe. Torrent Pharma has consistently maintained robust financials, making it one of the most attractive names in the Indian pharma sector.
Chart Analysis
Source: TradePoint, Definedge
On the chart, Torrent Pharma’s RSI is firmly trending above 60 on the monthly, weekly, and daily timeframes. This consistent positive momentum suggests that the stock is potentially well-positioned for further gains, supported by both the broader bullish trend in the Nifty Pharma index and the company’s fundamentals.
- Laurus Labs
Laurus Labs is a prominent player in the Indian pharmaceutical industry, primarily known for its work in active pharmaceutical ingredients (APIs), generic formulations, and contract manufacturing. The company has experienced rapid growth recently, driven by its focus on high-demand segments such as antiretroviral (ARV) drugs and oncology products. Laurus Labs’ innovative approach and robust pipeline have garnered attention in the pharmaceutical sector.
Chart Analysis
Source: TradePoint, Definedge
Laurus Labs is currently consolidating in a tight range between 550 and 580, but its RSI on the daily, weekly, and monthly charts remains above 60. This indicates that the stock maintains strong bullish momentum despite the consolidation at higher levels. This is a positive sign, suggesting that the stock could resume its upward trajectory if the broader Nifty Pharma index continues its breakout.
To conclude, the Nifty Pharma index shows promising signs of a bullish trend, with key stocks like Torrent Pharma and Laurus Labs aligning with our Bold Bulls strategy. By focusing on stocks with RSI above 60 on multiple timeframes, we ensure that we are tapping into the strongest market trends. If the Nifty Pharma index continues its upward momentum, these stocks could see significant gains in the near term.
Disclaimer: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. This article is strictly for educative purposes only.
As per SEBI guidelines, the writer and his dependents may or may not hold the stocks/commodities/cryptos/any other assets discussed here. However, clients of Definedge may or may not own these securities.
About Writer:
Brijesh Bhatia has over 18 years of experience as a trader and technical analyst in India’s financial markets. He is a well-known face in the business channel as a Market Expert and has worked with broking giants like UTI, Asit C Mehta, and Edelweiss Securities. He is currently a Senior Research Analyst and Editor at Definedge.
