Over 75% pharma stocks eye breakout; most may see up to 15% upside

Nifty Pharm index clinched to a new historic peak in the recent sessions, triggering fresh breakouts in several of its constituents. Reddy laboratories, Torrent Pharmaceuticals, Zydus Lifesciences ,Sun Pharmaceutical Industries, Alkem Laboratories, Cipla, and Abbott India firmly claimed new territories hitting fresh all-time highs.

On Monday, shares of Laurus Labs soared over 6 per cent, while Gland Pharma and IPCA Laboratories gained 3 per cent each. Similarly, NATCO Pharma, Lupin and Glaxosmithkline Pharmaceuticals advanced between 1 per cent to 2 per cent in a session where benchmark indices opened on a sluggish bias.

The Pharma Index has surged over 18 per cent since the start of the current year, robustly building a support base that further viewed a gradual up move. The current momentum appears resilient, and a move towards 15,500 cannot be neglected. 

Stock such as Aurobindo Pharma is on the verge to double this year, rising 93 per cent. In addition, Glenmark Pharmaceuticals, and Zydus Lifesciences are among the top contenders to advance, rising 88 per cent and 54 per cent, respectively. 

While Pfizer, Gland Pharma, and Laurus Labs have plunged in negative terrain so far this year, the recent up move in Pfizer and Gland Pharma suggest a possible reversal in trend. Shares of Laurus Labs continue to trade sluggish.

A “Golden Cross” is contemplated as the most reliable indicator for any bullish stock. In the recent sessions, stocks like Aurobindo Pharma, Biocon, Divi's Laboratories, Glaxosmithkline Pharmaceuticals, Lupin, NATCO Pharma, Sanofi India, Sun Pharmaceutical Industries, and Torrent Pharmaceuticals have broken out of this bullish indicator, reflecting an upside of 20 per cent to 25 per cent in the medium-term.

Among stocks presently trading in the overbought category of respective indicators, especially, Relative Strength Index (RSI), the underlying momentum persistently supports the upward bias. This list includes breakout stocks like Zydus Lifesciences, Lupin, IPCA Laboratories, Glenmark Pharmaceuticals, etc.

Barring, Pfizer, Gland Pharma, and Laurus Labs, all other constituents of Nifty Pharm Index trade over the 200-day simple moving average (SMA), revealing a change in trend to bullishness following a firm hold over the  significant average.