Nifty Pharma eyes breakout; Biocon, 2 others may rally up to 22%: Analyst

Kunal Shah of Mirae Asset ShareKhan expects breakout on the Nifty Pharma index above 23,500 levels; the analyst recommends Lupin, Biocon and Torrent Pharma as top sectoral stock bets.

Pharma stocks have outperformed the broader market in February thus far, with the Nifty Pharma index up nearly 3.5 per cent as against a 0.5 per cent up move on the Nifty 50 index.  Among individual stocks - Sun Pharma, Torrent Pharma and JB Chemicals rallied around 7 per cent each. Ajanta Pharma, Laurus Labs, Piramal Pharma, Dr. Reddy's Laboratories, Biocon, Divi's Laboratories and Lupin were up in the 4 - 6 per cent range.  On the flip side, Alkem Laboratories, Abbott India, Mankind Pharma and Aurobindo Pharma slipped 3 - 5 per cent each. The overall sectoral breadth, however, was largely positive, with 14 out of the 20 Nifty Pharma index constituents holding gains as of date, shows ACE Equity data.  Given this background, Kunal Shah, senior technical analyst at Mirae Asset ShareKhan holds a positive view on the Pharma sector and expects the following three stocks - Lupin, Biocon and Torrent Pharmaceuticals—to fare better going ahead.  Here's a detailed technical analysis on Nifty Pharma and the 3 stocks: 

Nifty Pharma

Current Level: 22,355 

 

 

  Kunal Shah believes that the Pharma Index is currently navigating a period of strategic consolidation, characterized by a Symmetrical Triangle pattern on the weekly chart, and oscillating within a defined range of 21,300 to 23,500 levels.  The analyst from Mirae Asset ShareKhan highlights that the index has faced multiple rejections at 23,500 levels.  "A decisive breakout above this ceiling is required to reignite bullish momentum, potentially clearing a path toward the 25,000 mark," says Shah.  On the other hand, Shah reckons that the swing low at 21,300 serves as the critical support; the bias is likely to remain positive as long as the Nifty Pharma index holds above the same. 

Biocon

Current Market Price: ₹385  

 

  "Biocon is currently at a critical technical juncture on the weekly chart, hovering on the verge of a significant breakout from a long-term falling trend line. This pattern suggests that the multi-month period of corrective price action is nearing exhaustion," highlights Shah.  The stock is currently testing a formidable supply zone between ₹390 and ₹400 levels, says Shah; above which, the analyst expects a structural confirmation of a trend reversal.  As such, the analyst projects an upside target toward a new high in the ₹450 – ₹470 zone for Biocon. This implies a potential upside up to 22 per cent from current levels. 

Lupin

Current Market Price: ₹2,222 

 

  "Lupin's weekly chart reflects a robust structural setup, where the price is currently forming a Rounding Base pattern. A key highlight of this formation is the stock's ability to find consistent support near the ₹1,870 mark, which aligns with its previous swing high," explains Shah.  Going ahead, the analyst expects the bullish structure for Lupin to remain intact as long as the stock holds above the ₹2,100 – ₹2,070 support zone.  On the upside, Shah reckons that a decisive breakout above the immediate hurdle at ₹2,280, can accelerate momentum and open the doors for a rally toward the ₹2,400 and ₹2,500 levels (up to 12.5 per cent upside potential). 

Torrent Pharma

Current Market Price: ₹4,218 

 

  Torrent Pharmaceuticals recently delivered a strong structural breakout on the weekly chart by crossing the ₹3,900 mark, says Shah. He reckons that this level - which previously acted as a stiff resistance - has now flipped into a robust support for the stock.  "The stock's price action signals a "Buy on Dips" regime, following stellar Q3 results and record-high performance. With the stock currently trading above ₹4,200, the technical path of least resistance remains upward," explains Shah.  The analyst from Mirae Asset ShareKhan believes that the stock now eyes the ₹4,500 - ₹4,600 zone as the next major objective.  Disclaimer: The views expressed by the brokerage/ analyst in this article are their own and not those of the website or its management. Business Standard advises users to check with certified experts before taking any investment decisions.