Its very difficult to predict markets atleast in the short term. I have been cautiously bullish since a long time. But my current shift from pharma has not got too much to do with market levels.
Some things did not add up for me in my invesetments in torrent and alembic. Both did not react to far better than expected quarters during the abilify opportunity. Plus I was uncomfortable with the kind of capex that was going on in a lot of pharma companies. It was almost as if most companies had loads of cash flow and wanted to blow it off in capexes. And now as usually happens after huge capex in specific sector, demand begins to face headwinds for one or the other reason. Without people realising it, the leaders have corrected equal or more than 50% from their tops. While people may consider this as a bottom fishing opportunity, I would like to see for some more time how things pan out.
There has been a fair bit of price erosion in US markets and according to Sun Pharma boss, it appears to be the new norms. This should affect margins and returns which could lead to de rating of the whole sector. Thats probably what we have been seeing in the ongoing correction in the stock prices of pharma companies.
Another thing is that a sector which has had a superb bull run since 2008-09 till 2016 which is almost 7=8 years undergoes correction I think the time correction element also needs to be taken into account. There has to be sufficient consolidation post this correction before the sector picks up investor fancy. For a clear example one can see how real estate sector suffered and for how long before the current comeback.