Like the FMCG sector, the healthcare sector is also considered a ‘defensive’ sector. What does ‘defensive’ sector mean? It means stocks from the sector usually don’t fall as much as the Sensex or Nifty during down trends. Nor do they rise as much as the Sensex or Nifty during up trends.
Is that good or bad? Well, let us say they provide more stability to your portfolio by being less volatile. The added advantage of owning healthcare sector stocks is that they don’t go in and out of fashion. If you are a diabetic or suffer from hypertension, you have to take a regular dose of medicines regardless of the state of the economy, or a change of government, or an increase in real-estate prices.
With the Sensex and Nifty under bear attacks, is this a good time to enter healthcare sector stocks? Yes, as long as you are selective. Not all stocks from the sector are performing well – as the 1 yr daily bar chart patterns of 10 stocks from the sector show.
After consolidating sideways with an upward bias for 10 of the past 12 months, the stock has broken out upwards. However, the stock trades in very low volumes, which causes large price swings and makes buying or selling a difficult proposition.
The stock has been in a sideways consolidation for the past year. It is also prone to big price swings because it trades in low volumes. Investors holding such stocks usually treat them as family heirlooms and pass it on to future generations.
The stock had been consolidating sideways with a downward bias before dropping deeper into a bear market. The recent Supreme Court judgement against its patent application for a modified form of its popular cancer drug ‘Gleevec’ has been a setback.
The stock has been in a down trend since touching a peak in Sep ‘12, and has dropped into a bear market.
Dr. Reddy’s Lab
The stock is in a bull market, despite a sharp correction during Feb ‘13. It appears to have formed a bullish ‘double bottom’ pattern.
The stock has been in a steady up trend for the past 12 months. Periodic corrections below its 50 day EMA has helped it to move higher. This is what a bull market looks like on a chart.
This stock is also in a year-long up trend that has twice received support from its rising 200 day EMA.
Another stock that has been moving up in a bull market for the past year.
Once a favourite of small investors, the stock has been in a down trend for the past 12 months, though it is showing some signs of a recovery. THis is what a bear market looks like on a chart.
The stock is in a bull market, but has been consolidating sideways for the past 5 months.