2025: The pharma stock poised to outperform

While volatility grips the broader market, the pharmaceutical sector is making new highs, as reflected in the performance of the Nifty Pharma index. (Image: Pixabay)
While volatility grips the broader market, the pharmaceutical sector is making new highs, as reflected in the performance of the Nifty Pharma index. (Image: Pixabay)

Summary

  • As 2024 ends with market turbulence, the pharmaceutical sector is emerging as a beacon of stability and growth, with this stock leading the pack.

Merry Christmas to all our readers!

As we step into the final stretch of 2024, it’s time to reflect on the market’s journey, analyse the highs and lows, and contemplate the road ahead. In the 52nd week of 2024, the market continues to show its characteristic twists and turns, leaving everyone asking: what does 2025 hold?

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The Nifty50 index recorded a commendable gain of approximately 9% for 2024. However, the fourth quarter brought a sharp 8% pullback—the steepest quarterly decline since Q2 of 2022, when the market fell nearly 9.65%. That earlier drop marked a pivotal retracement bottom, setting the stage for a post-2020 rally that propelled markets to new heights. Could history repeat itself? For now, uncertainty reigns.

While volatility grips the broader market, the pharmaceutical sector is making new highs, as reflected in the performance of the Nifty Pharma index.

Nifty Pharma: Outperformance over Nifty50

As we approach 2025, investor sentiment is clearly gravitating toward defensive sectors. The pharmaceutical sector has been a standout performer in this shift. The Nifty Pharma index reached an all-time high in Q4 of 2024, reflecting a notable move away from high-risk, high-growth sectors toward safer, more stable stocks.

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A closer look at the Nifty Pharma/Nifty50 ratio chart reveals a compelling narrative. This ratio broke out from its 2021 levels during 2024, signaling that pharmaceutical stocks may continue their upward trajectory, potentially outpacing the broader market. Such a breakout, especially after a prolonged period of consolidation, is a significant technical indicator, hinting at the start of a long-term growth phase for the sector.

(Source: TradePoint, Definedge)
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(Source: TradePoint, Definedge)

The 0.25% X 3 Daily ratio chart highlights the Nifty Pharma index’s strong upward momentum relative to Nifty50. The anchor column and a series of triangle breakouts reinforce the bullish outlook, suggesting that this rise is still in its early stages. When a sector begins to outperform after years of stagnation, it often signals more than a temporary trend—it could mark the beginning of a structural growth story.

Which Nifty Pharma stocks could outperform in 2025?

Using the Ultimate P&F-RS Matrix scanner, which evaluates stocks based on relative strength and chart patterns, we analysed the 20 constituents of the Nifty Pharma index. Several stocks emerged as potential outperformers for 2025.

Mankind Pharma scored a perfect 19 points, establishing itself as the clear leader. Other notable performers include Glenmark (16 points) and Dr. Reddy’s Laboratories (15 points).

Mankind Pharma: The standout performer

Founded in 1995, Mankind Pharma has established a robust presence in both domestic and international markets, focusing on accessible, affordable healthcare. Its diverse product portfolio spans therapeutic areas such as antibiotics, anti-infectives, dermatology, and gastroenterology.

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On the charts, Mankind’s ratio has broken out of a 17-month trendline and is moving decisively upward. This indicates that Mankind is outperforming the Nifty Pharma index and could continue to do so in the months ahead.

Mankind/Nifty Pharma Ratio Chart. (Source: TradePoint, Definedge)
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Mankind/Nifty Pharma Ratio Chart. (Source: TradePoint, Definedge)

Despite its relatively low weight in the index, Mankind offers an attractive risk-reward profile.

The road ahead: 2025 and beyond

Looking forward, defensive sectors like pharma appear well-positioned to offer a safe haven for investors navigating broader market risks. With stocks like Glenmark (+81%), Natco Pharma (+70%), Lupin (+64%), Mankind (+51%), and Divi’s Lab (+49%) leading the pack in 2024, the stage is set for further gains. Among these, Mankind Pharma stands out as a promising pick, with its recent breakout on the ratio chart signalling potential upside.

For more such analysis, read Profit Pulse.

As we bid farewell to 2024, the Nifty Pharma index offers a glimmer of optimism for investors unsettled by market volatility. Its strong performance and technical indicators suggest that 2025 could usher in a period of sustained growth for the pharmaceutical sector.

Note: This article aims to share interesting charts, data points, and thought-provoking opinions. It is not intended as investment advice. If you are considering making an investment, please consult your financial advisor. The content is strictly for educational purposes.

About the author: Brijesh Bhatia brings over 18 years of experience in India's financial markets as a trader and technical analyst. He has worked with esteemed organizations such as UTI, Asit C. Mehta, and Edelweiss Securities. Currently, he serves as an analyst at Definedge.

Disclosure: The writer and their dependents do not hold the stocks discussed in this article. However, clients of Definedge may or may not own these securities.

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