Nifty Pharma dips to 7-mth low; bears may gain control if breaks 52-wk low

Barring Sun Pharmaceutical Industries, which is anticipated to rally up to 10 per cent; other stocks indicate weak bias, as per technical charts

Nifty Pharm index broke a 7-month low, post two of its constituents disappoint specification of the US Food and Drug Administration (USFDA). Shares of Cipla plunged towards its 52-week low of Rs 883.75 after the drug regulator issued eight observations to its Pithampur-based manufacturing unit. 

In similar incident, Biocon failed to meet degradation specifications necessitating the recall 3,665 bottles of antifungal medication. On Tuesday, the share price slipped to its new 52-week low.

The broad trend in the Nifty Pharm index has been satisfactory since November last year.  The index trades close to 20 per cent lower from its all-time high of 14,938 reached last year. 

Except Sun Pharmaceutical Industries and Torrent Pharmaceuticals, all other companies have seen a gradual decline. Shares of Divi's Laboratories, Laurus Labs and Granules India have tumbled 14 per cent, 11 per cent and 10 per cent since the start of the year, respectively. 

Shares of Cipla and Torrent Pharmaceuticals gained close to a per cent on Tuesday, while Sun Pharmaceutical Industries fell 0.50 per cent.

Here’s the technical outlook on pharma stocks:- 

Nifty PHARM

Outlook: Selling pressure continues 

The current formation on the Nifty Pharm index clearly suggests weakness and a negative bias. The “Lower High, Lower Low” pattern, with every upside witnessing sell-off, indicates bearishness. The index is heading towards 11,726 mark, which is its 52-week low. 

To reverse this sentiment, the index needs a break through the hurdle of 12,500, and only upon then will the bias may start shifting. There is a trendline resistance at 12,400 level. CLICK HERE FOR THE CHART

Sun Pharmaceutical Industries Ltd (SUNPHARMA) 

Likely target: Rs 1,125

Upside potential: 10%
 

As long as the support of Rs 960 is shielded, the upward bias for the shares of Sun Pharmaceutical Industries could remain robust. While there is weakness at current juncture, as both the technical indicators, Moving Average Convergence Divergence (MACD) and Relative Strength Index (RSI), are trending downward, the price action is not letting selling pressure to take over. 

A major breakout over Rs 1,020 could propel the stock to hit a new all-time high of Rs 1,115, shows the daily chart. CLICK HERE FOR THE CHART

Lupin Ltd (LUPIN)

Likely target: Rs 579

Downside potential: 13%

Shares of Lupin have tumbled beneath the vital 200-day moving average (DMA), current set at Rs 686 and are failing to overcome the same. If this weakness continues to persist and the stock disappoints in surpassing the crucial average, the trend may shift in the direction of Rs 579.50, its 52-week low. Immediate support comes to Rs 630 levels, as per the daily chart.

The Moving Average Convergence Divergence (MACD) has fallen under the zero line, with a negative crossover, reflecting a weak bias ahead.  CLICK HERE FOR THE CHART

Torrent Pharmaceuticals Ltd (TORNTPHARM)

Outlook: weakness below the 200-DMA

Post breaching Rs 1,600 in last December, the shares failed decisively to overcome this hurdle since then. Now, when the weakness has slipped under the 200-DMA, the short-to-medium bias may take over selling pressure, entering bearish sentiment. However, if the stock rebounds quickly and leaps over the 200-DMA set at Rs 1,514 level, it may regain the losing sentiment. At this momentum, the stock indicates weakness towards Rs 1,420 levels. CLICK HERE FOR THE CHART

Cipla Ltd (CIPLA)

Likely target: Rs 900

Downside potential: 8%

Cipla’s shares have broken down on the bearish formation of “Head and Shoulder”, on the weekly chart. This could lead the stock price to dwindle towards its next support of Rs 900 levels.  As of now, Rs 1,050 becomes the critical hurdle, unless it overcomes, the stock may not carry a bullish sentiment. The MACD has fallen beneath the zero line, a bearish signal supportive of the breakdown. CLICK HERE FOR THE CHART