The roughly 15% rally in the Nifty Pharma Index that’s occurred over the last four weeks has a lot of people asking “was that the bottom?”. In an attempt to answer that question I’ll be looking not only at the index itself, but at its 10 components as well.
Before we get into that though, I think it’s important to understand how this index is constructed. Despite there being 35 pharmaceutical stocks in the Nifty 500, the Nifty Pharma Index only has ten stocks in it that make up roughly 80% of the industry’s market capitalization. Situations like this are why we use equal-weighted indexes to get a better idea of what stocks in this industry are doing, as only looking at the cap-weighted index which is dominated by large-caps can mask the positive or negative relative performance of its mid and small-cap companies.
But today we’re talking about the cap-weighted index performance, so let’s get right into it.