Long-only investors found this past week to be difficult, particularly in the pharmaceutical industry. The Nifty Pharma index dropped 1.6% throughout the course of the week, which was the largest weekly drop since mid-May 2023. Contrary to popular belief, one small-cap pharmaceutical company managed to outperform the market by giving investors a 4.2% return. Lyka Labs Ltd (NS:LYKA) is the name of this business.
The price-to-earnings (P/E) ratio for Lyka Labs, which has a market capitalization of INR 384 crore, is currently -24.36. The stock’s technical analysis suggests a positive prognosis in the near term despite its continuous losses. Notably, the stock’s valuation isn’t excessively inflated, providing some downside protection if the stock’s direction changes. Looking at the price alterations from June 20, 2023, it can be seen that the stock is developing a U-shaped bottom, also known as a rounding bottom, on a daily time scale.
This pattern represents a slow shift in the ratio of supply to demand, with demand starting to outpace supply. This suggests that the stock is rising because bullish sentiment is starting to outweigh bearish opinion. The stock reached its highest closing level since June 21, 2023 on Friday, rising 4.7% to INR 121.6. Notably, the trading volume was significantly greater than the 10-day average of 110K shares, with 387K shares traded, supporting this upward momentum. This increase in trading activity is a sign of more investor interest.
A trend-following indicator that emphasises the present trend direction is the Donchian Channel (daily, 15), and the stock is currently trading at its upper threshold.
Investors may want to add this stock to their watchlist for the coming week in anticipation of potential long opportunities given the convergence of many signs pointing towards a credible rally.