Pharma index dips, but takes support at retracement

Indian benchmark indices witnessed short covering after straight three days of fall post a multiple resistance breakout. When almost all the sectoral indices have supported the benchmark indices in its marginal upswing, the Nifty Pharma index, the so called defensive index continued to fall shedding more than 0.5 per cent at 12.40 hours. The metal and bank stocks which hold more weightage than the pharma stocks in the benchmark index at 3 per cent, counterbalanced the pessimism in the pharma index.

Lupin, which holds 8.7 per cent in the pharma index tumbled more than 2.8 per cent, Dr. Reddy and Sun Pharma which hold 11 and 26 per cent, respectively, plunged more than 1 per cent keeping the Pharma index down. The index may bounce back with PEL, Divis Lab and Auro Pharma recovering and trading at 1 per cent plus gains.

Technically, the Nifty Pharma index had given a Symmetric Triangle pattern breakdown on February 2 and retested the lower trendline again for a breakdown after a pullback. Since then the index has seen a consistent fall until when the index witnessed a Double bottom pattern on March 23 and 26. The index surged up to 50 per cent retracement of the prior downward rally starting at 9,920. The index has turned back from the retracement with justifiable volumes and 14-period RSI negative crossover. Recently, it has bounced back from 50 per cent retracement of an upward rally from double bottom. However, we can expect fresh buying in the index only above 9,100 levels.