Pharma Sector set for gains: Dr Reddy’s Lab sees significant long position build-up

The Indian equity markets saw brisk trading last week on the back of supportive global developments and strong momentum in IT heavyweights that propelled the key indices to scale record highs.

The benchmark index Nifty50 starts this week on a subdued note, with the Nifty trading flat. According to Rajesh Sriwastava, a derivatives trader, the focus of the week will be on the pharma space.

At 10:13am on December 18, the Nifty Pharma index is trading at 16,419.05
up 239.25 points or 1.48 percent.

Options data indicates significant long build-up positions in the pharma sector.

Among individual stocks, Zydus Life, Lupin, Lauruslabs, Divislab, and Dr Reddy’s are witnessing long build-up positions, while short covering is observed in Granules, Biocon and Glenmark. No pharmaceutical company in the F&O segment is witnessing a short build-up.

Dr Reddy’s Laboratories Ltd

Sriwastava specifically recommends adding Dr Reddy’s scrip to your radar. “A short unwinding of 1,750-plus lots during Friday’s trade, indicating that the stock is poised for more short covering. These shorts were added on the day of FDA news.”

Table showing the open interest positions built up in Dr Reddy’s| Source: Rajesh Sriwastava

Bars in red indicate the change in open interest (OI) of call writers, while green bars show the change in OI of put writers

Options data suggests that put writers dominate for the day, with the 5,500 level being crucial, followed by 5,350. Strong resistance is observed at the 5,700 levels.

At 10:08am, Dr Reddy’s Laboratories Ltd scrip was trading at Rs 5,670.00, up 80.55 points or 1.44 percent.

Last week on December 11, shares of Dr Reddy’s Laboratories plunged nearly 7 percent as the US Food and Drug Administration’s some of the observations about the company’s unit in Telangana have been seen found to be “severe”.

Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own and not those of the website or its management.

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