ITC Share Price: The Driving Force Behind FMCG Sector's Bull Run

The Nifty FMCG index is trading close to its all-time high of 48,700. This is mostly due to its highest weightage constituent, ITC, hitting all-time highs every day.

ITC, with a weightage of 38% in the FMCG Index, significantly impacts its performance.

As one of the largest FMCG companies in India, ITC's strong financial performance and market dominance has made it a key player in the industry.

The company's diverse product portfolio, including popular brands such as Aashirvaad, Sunfeast, and Bingo! have made it a market leader.

In recent years, ITC has also made significant strides in sustainability and corporate social responsibility, which has further boosted its reputation and appeal among investors.

As long as ITC continues to perform strongly, it's likely the FMCG index will be buoyed by its weightage in the coming months.

Nestle and Radico are the other stocks from the basket that have managed to gain double digits in 2023.

We are witnessing the divergence in stock performance of the FMCG Index.

When such divergences occur, it's important for investors to thoroughly research and understand the underlying reasons and make informed decisions.

In some cases, it may be wise to invest in individual stocks within the index rather than the index as a whole, to capture the potential gains of the outperforming stocks.

However, investors should also be aware of the potential risks and volatility associated with investing in individual stocks.

The market breadth or the advance-decline ratio of the FMCG index on the weekly closing basis is 60% i.e., 9 out of 15 stocks in the FMCG index.

The advance-decline ratio is a measure used to assess the overall market sentiment and direction. It's calculated by dividing the number of stocks that have increased in price (advancing stocks) by the number of stocks that have decreased in price (declining stocks) over a period of time.

The resulting ratio can range from 0 to 1, with a value greater than 0.5 or 50% indicating advancing stocks outnumber declining stocks, and a value less than 0.5 or 50% indicating the opposite.

The chart speaks for itself

The FMCG index was one of the outperforming indices in the Indian markets with gains of 17%.

ITC, the leader in the index, gained 59% to close 2022 near an all-time high. The follow-up bullish momentum prolonged into 2023.

Nifty FMCG Weekly Chart

 

On the weekly chart, the index has broken out of its 18-weeks range as the previous high of 46,331-46,398 acted as a resistance zone.

A 52-week high breakout at the start of April 2023 signaled a resumption of the bullish trend in the index.

The 52-week high breakout is often viewed as a bullish signal by traders and investors because it suggests the stock has significant positive momentum and could potentially continue to rise in price.

The recent breakout indicates the bulls are in control of the momentum and ITC will continue to lead the index.

Investors and traders should understand the risk of a stock's performance in the index before investing in the index.

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Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...