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After a stellar rally in 2020 and in most of 2021, the BSE Healthcare index had a bad year in 2022. The index tumbled about 12 per cent when the broader benchmark index, the Nifty 50 continued to record new highs.
However, 2023 has been a good year so far for the index. It has risen about 8 per cent so far this year recovering most of the loss made in the previous year.
The index is currently at 24,905. The price action on the charts signals a clear trend reversal. That leaves the outlook bullish for the BSE Healthcare index.
The doors are now open to see another 15-20 per cent rally from the current levels. Here is what the charts say on the index.
Positive indicators
Several indicators on the charts justifies the case for the trend reversal in the index and strengthens the bullish scenario.
Graph Source: MetaStock
First, the 5 per cent rise seen in June so far has broken the downtrend that was in place since September 2021. The rise has decisively broken the downtrend line as well as the 21-Month Moving Average (MMA).
Graph Source: MetaStock
Second, the price action since April 2022 indicates a double-bottom formation. Double bottom is a strong bullish reversal pattern that marks the end of the downtrend. The rise over the last couple of weeks has broken the neckline resistance around 24,300 and confirms this pattern.
Graph Source: MetaStock
Third, the low of 20,848 made in June 2022 and the bounce thereafter has happened from around a key Fibonacci retracement support. The 38.2 per cent Fibonacci retracement level of the uptrend between the March 2020 low and September 2021 high is at 20,855.
All these factors indicates that the BSE Healthcare index is gearing up for a further rise from here.
Long-term outlook
The BSE Healthcare index (24,905) is looking strong. The outlook is bullish. The index can rally in the coming months.
Graph Source: MetaStock
Support is in the 24,300-24,250 region. Below that, the 21-MMA support is at 23,560 and a trend support at 23,200 are slightly lower ones.
Also read: Zydus Lifesciences: Why investors should accumulate this stock
The chances are high for the index to sustain above the 24,300-24,250 support zone itself. The BSE Healthcare index can rally to 30,500 over the next one year. In a slightly wider time-frame of, say, two years, the index can target 34,000.
This bullish outlook will go wrong only if the index declines below 23,200. But that looks less likely.
How to participate
Investors can make use of the ETF/index fund route to ride on the robust outlook for the Healthcare index.
Also read:Technical Call: Natco Pharma- BUY
Few funds based on the BSE Healthcare or the Nifty Pharma (which on the charts, is similar to the BSE Healthcare), such as ICICI Pru Nifty Pharma index fund, Nippon India Nifty Pharma ETF and Motilal Oswal BSE Healthcare ETF are available.
Investors can choose from among them based on expense ratios, tracking error and trading volumes (in case of ETFs).
Also read: Technical Call: Aurobindo Pharma- BUY
For direct stock investors, within the BSE Healthcare index, the following are some of them that are looking good on the charts from a long-term perspective. Aurobindo Pharma, Zydus Lifesciences, Natco Pharma, FDC and Jubilant Pharmova.
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