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  • May 8, 2023 - ITC Share Price: The Driving Force Behind FMCG Sector's Bull Run

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

May 8, 2023

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.

chart

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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Investment in securities market are subject to market risks. Read all the related documents carefully before investing

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Brijesh Bhatia

Brijesh Bhatia Research Analyst and expert chartist, is the editor of Alpha Wave Profits. Fully committed to his craft, Brijesh has mastered the art of making money by trading using technical analysis. Brijesh has an MBA from ICFAI and 16 years of experience in India's financial markets. He began his career on Dalal Street as commodities dealer and it wasn't long before he developed his own unique trading system. Brijesh worked on his trading system until it could be expected to deliver 5 units of return for every unit of risk.


FAQs

Which are the top FMCG companies in India?

Based on marketcap, these are the top FMCG companies in India:

You can see the full list of FMCG stocks here.

And for a fundamental analysis of the above companies, check out Equitymaster’s Indian stock screener which has a separate screen for best FMCG stocks in India.

Which are the top gainers and top losers within the FMCG sector today?

Within the FMCG sector, the top gainers were ARCHIES (up 10.0%) and ADANI WILMAR (up 7.6%). On the other hand, ORIENT BEVER (down 5.0%) and NATURO INDIABULL (down 3.3%) were among the top losers.

For more, please visit the BSE FMCG index live chart and also check out our FMCG sector report.

How should you value FMCG companies?

Investing in stocks requires careful analysis of financial data to find out a company's true worth. However, an easier way to find out about a company's performance is to look at its financial ratios.

Two commonly used financial ratios used in the valuation of stocks are -

Price to Earnings Ratio (P/E) - It compares the company's stock price with its earnings per share. The higher the P/E ratio, the more expensive the stock.

Price to Book Value Ratio (P/BV) - It compares a firm's market capitalization to its book value. A high P/BV indicates markets believe the company's assets to be undervalued and vice versa.

To know more about the FMCG sector's past and ongoing performance, have a look at the performance of the Nifty FMCG Index and BSE FMCG Index.

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