Consumer stocks took a beating during last quarter’s selloff in Indian equities, reflecting signs of stress in urban demand.
A flurry of third-quarter business updates will keep traders busy on Monday as they look for signs of a rebound in growth after depressing second quarter earnings. Bulls will be eyeing a comeback, as Nifty futures indicate a positive start to the first full week of the New Year.
China’s New Year pain can be India’s gain
Convincing foreign investors to stay put in Indian equities is a hard sell amid a slowing economy and a weakening rupee. Yet, the New Year selloff in Chinese shares offers overseas money managers a reason to reconsider. Many were quick to cut their India positions to cash in on the rally in China. Speaking to Bloomberg Television on Friday, Ed Yardeni of Yardeni Research said that fund managers might fare better by maintaining their India bets despite high valuations. That is due to mounting skepticism about the durability of China’s economic recovery.
Consumer stocks signal a revival
Consumer stocks took a beating during last quarter’s selloff in Indian equities, reflecting signs of stress in urban demand. But the tide may be turning, going by the rising share prices. Analysts are optimistic about a turnaround in Jubilant Foodworks’ pizza business, while DMart delivered a surprisingly strong third-quarter update. The cheer appears to have rubbed off on others like Sapphire Foods, Hindustan Unilever, Bata India, and even credit card firm
SBI Cards and Payment Services
. With expectations of a pick up in rural consumption and likely tax breaks for individuals in the upcoming federal budget, the rally may sustain for a while.
City-gas stocks rally on hopes of breather
Shares of Indraprastha Gas and Mahanagar Gas rallied on Friday after Citigroup analysts cited a local media report suggesting potential supply relief for these companies. Citi said that it will be a “significant relief” if the government directs ONGC and GAIL India to provide an additional 0.6 mmscmd of natural gas to city gas distributors, along with plans to divert gas from new wells in the future. These stocks had sold off in November after the government abruptly cut the gas supply from the domestic pool.
Analysts actions:
- ITC Ltd Rated New Buy at ICICIdirect.com; PT 555 rupees
- DMart Rated New Accumulate at Asian Markets; PT 4,000 rupees
- Zomato Rated New Buy at Anand Rathi Securities; PT 385 rupees
NSE Nifty Auto Index Back to 200DMA
Auto stocks have revved up in the New Year, with the NSE’s sector gauge logging its strongest weekly gain since September. Last month’s robust sales have improved the sector’s outlook, but a roadblock remains on the daily charts: the 200 day-moving average. The index has failed to surpass this technical level twice since dropping below it in early November. Given the ongoing weakness in consumption trends, traders may wait for another month of strong sales before changing gears on their outlook for the sector.
