Defensive sectors are often lead indications of market trends because money starts to move into them at late stages of a decline and move out of them in late stages of a market rally. That said some sectors like IT get their defensive tag more because they have continued to grow at a slow rate in a slow economy. But that might not be the right way to think about it. A defensive sector was supposed to describe one that will continue to do business irrespective of weakness in the economy and Pharma probably fits that better. Still markets do not always move on the fundamentals of business but also liquidity and money flow.

This weeks posts focus on Pharma and IT sectors but also a side look at Infosys that I have covered many times in the last few years being the sector bellwether.

Here is this weeks Truth About the Markets

Infosys v.s Sensex After the peak in March of 2000 was it really worth this journey with Infosys? The Relative strength chart of Infosys to Sensex shows that it peaked in performance back in 2000 and that peak has not been surpassed to date. 15 years of failure to beat the market at its own game because it became too big. Defensive? In absolute terms maybe.

 

BSE Healthcare If you are done being bullish Pharma, I am, then its time to get a reality check. All the pharma bulls have baked in a long term bottom but no the EW charts do not agree. The rallies were a series of 3 wave advances that failed at the 61.8% mark recently. Now nothing stops it from being another 3 wave decline. If then decline halts at the 12500 shelf support then we have hope for Pharma, but if that breaks then you will need Dope for pharma

 

BSE IT The Indian Tech sector has topped out long term, [for the nth time yes], but that is the case. After falling with US tech stocks they are bouncing back a bit in wave B and sitting on top of the blue neckline. Once the line breaks we are in wave C all the way to 11140 based on the H&S pattern implications. What we do not know for sure is if wave C down started already. We are on the edge here for this sector. The best is over for now for sure for long term investors.