Return of Covid 19 - India's Second Wave - Pharma Stocks

In my Covid update a month ago I noted that the upper trend in new cases in the US was state-specific and was still not showing up in California or New York. What appeared true at that point in time is no more true as the charts below show. California has gone back past the highs seen earlier this year, and last night new shutdowns have been implemented with night clubs and gyms being closed and only grocery stores and pharmacies kept open.

New York while not at the highs is now seen a steady increase in case counts and could also be at risk of higher numbers. These trends follow what we have now seen in Europe and some other parts of the world.

I also noted in my previous report that India sees a lag time of approximately one month for these trends to show appear. In April US cases started to rise first and India followed a month later. During that timeframe, people thought India was the outlier and had some special immunity. I'm not sure why are data lags the world unless we are counting slow or releasing data with a lag. When US cases peaked and declined in August I said something similar and a month later cases in India also peaked and declined in September. If this pattern is anything to go by then what we should expect is on the following chart. Delhi is already reporting new highs in cases and Ahmedabad is locking down over this weekend because of a similar trend. Maharashtra may not have seen an explosion yet but I do expect Mumbai to breakout to new highs sooner than later given these trends. We may be more prepared than before but it is still not time to let our hair down in the face of the Covid 19 virus. In short, we may have seen the bottom for the state as well.

This trend should then also drive the countrywide numbers higher from where they are right now. Financial markets so far may appear less worried because of the economic and financial stimulants. However short-term this provides investors a reason to be less complacent about the bull run and be prepared for some near-term setback in financial markets. 

While most of the news channels speak about Delhi and Gujarat where cases surpassed the previous peaks here are some emerging trends. MP/Bhopal cases have started to pick up again

Chandigarh too we are seeing an upturn.

Will this once again boost the inevitable pharmaceutical sector. That is definitely possible as Pharma stocks have been through a good consolidation. The healthcare index is due to start a 5th wave higher and should be watched closely with stock-specific momentum indicators and breakouts as a sign of which stocks are leading the move higher. Yes, last time I marked the move as 5 complete but the triangle in wave 4 shown with Blue lines could mean something else. In fact 3=1 on this chart and if we project 5=1 as well we end up at 26430 on the BSE Healthcare index from 19714 now. That is a near 30% upside in pharma stocks coming up. Not the 4th wave triangle formation held the support at the 20-week average so it is an important support. Unless it's broken we could get sector rotation right back to Healthcare.