In November the Nifty Pharma / Nifty 100 ratio met our downside objective as momentum diverged positively, sparking a massive 6-month period of outperformance from the Pharma sector. We've ridden this trend since it started, but prices are now back at the ratios 2014 lows and beginning to fail. What acted as support is now resistance...and following the massive run prices have had, this is a very logical level for prices to pull back and digest their recent gains. As long as prices are below their recent highs, then we'd expect the Pharma sector to underperform in the near-term. Long-term the trend in this ratio is clearly higher, but for now, we want to be taking profits as money rotates into other areas of the market that haven't run as much...like Nifty Financial Services. You can view our other ideas discussing this topic linked below.
