Markets
Nifty FMCG is surging. Here are 3 stocks to add to your watchlist
Summary
- The Nifty FMCG Index has breached key levels, signalling a robust growth phase. The sector is emerging as a vital growth driver in the Indian stock market with these three stocks being the chart toppers
The stock market is buzzing with excitement as the Nifty and Sensex scale new heights, but the real showstopper is the Nifty FMCG Index. Quietly leading the rally, the FMCG sector has breached key levels, signalling a powerful breakout that demands attention. With essential household names and consumer staples at its core, the FMCG sector is not just a defensive play, it is emerging as a strong growth driver.
Let's analyse the Nifty FMCG charts and the top three breakout stocks.
Nifty FMCG Index
The Nifty FMCG Index represents the performance of Indian companies in the fast-moving consumer goods sector. It includes businesses that produce non-durable, and mass-consumption products that are readily available for purchase. These are essential everyday items, ranging from food and beverages to personal care and household goods, that people consistently rely on, regardless of economic conditions.
Nifty FMCG P&F Chart
The Nifty FMCG Index has broken out of a "super pattern—bullish" on the point-and-figure (P&F) chart. This significant breakout signals a clear resumption of the uptrend following a consolidation phase.
What is a P&F Chart?
A point-and-figure chart is a chart method using X’s and O’s. The X denotes bullish moves, while O denotes bearish moves. Unlike traditional time-based charts, P&F charts focus solely on price changes and are considered "noiseless." They filter out minor price fluctuations, highlighting significant trends and reversals. The lack of time constraints gives a clearer picture of supply and demand dynamics, helping chartists make more informed decisions.
What is convincing from this breakout is the broad participationofstocks within the index, reflecting strong investor confidence and widespread buying enthusiasm.
As the base of the stock price range moves higher, the sector's stability and growth prospects become increasingly attractive to long-term readers.
Nifty FMCG Weekly Bar Chart
On the weekly bar chart, a classic "cup and handle" pattern formed in July. This bullish continuation pattern indicates that, after a consolidation period, the market is gearing up for a further rally. The "cup" part of the pattern represents a period of consolidation, while the "handle" shows a minor pullback before a sharp breakout to new highs. The rising trendline marks the robust bullish trend on the charts.
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After completing this pattern, the index quickly surged from 58,000 to 63,000, showcasing solid bullish momentum. While August saw a brief consolidation phase, the market regained its upward momentum by the end of the month. This indicates that the bulls are back in charge, driving the index higher in line with the broader market trends that continue to scale fresh peaks.
Three FMCG stocks breaking out on the charts
1. Hindustan Unilever Ltd. (HUL)
As one of the giants in the FMCG sector, Hindustan Unilever Ltd. (HUL) holds a 24% weightage in the Nifty FMCG Index, making its performance crucial to the index's overall direction. HUL has long been a favourite among investors, and its recent price action has been particularly noteworthy.
HUL Weekly Bar Chart
In technical analysis, it's often said that "history repeats itself," and this is clearly reflected in the weekly bar chart of HUL. There are three distinct instances where the stock's price action mirrors past movements:
⦁ Lack of bearish follow-up: HUL has consistently reversed after reaching all-time highs, with bearish pullbacks quickly followed by renewed buying interest. This demonstrates strong demand for the stock at lower levels.
⦁ Consolidation breakouts: Historically, HUL has entered consolidation phases only to break out decisively. This trend repeats, with the stock breaking out after a consolidation period, reinforcing the bullish sentiment.
⦁ Bullish RSI crossover: The relative strength index (RSI) recently saw a bullish crossover, further strengthening the case for continued upward momentum.
With these technical signals aligning, HUL is trading around ₹2,840 and could potentially surprise readers in the next 6-12 months.
2. Colgate Palmolive (India) (COLPAL)
Colgate Palmolive (India) is another prominent player in the FMCG sector, contributing 3.82% to the Nifty FMCG Index. Known for its dominance in the personal care segment, Colgate has been a consistent performer and has recently witnessed a strong breakout.
COLPAL P&F Chart
On the 0.25% X 3 Daily Point & Figure chart, Colgate's stock price broke out around ₹3,000, and the follow-through breakouts confirm the robustness of this rally.
Interestingly, the higher volumes in the bullish column further validate this breakout, indicating strong buyer participation. Despite its smaller weight in the index, Colgate could potentially outperform the broader FMCG index in terms of returns and is certainly one to watch.
3. Gillette India
While not a constituent of the Nifty FMCG Index, Gillette India remains a key player in the consumer goods landscape. Known for its iconic grooming products, Gillette India has captured the attention with its recent price movements.
Gillette P&F Chart
On the 0.25% X 3 Daily Point & Figure chart, Gillette's stock price broke out around ₹7,000, with the supply zone acting as a crucial pivot. After retracing from ₹7,900 to ₹7,150, this supply zone transformed into a demand zone, offering firm support.
The subsequent breakout, accompanied by a "Triple Top Buy" pattern, signals renewed bullish momentum. This rally, fuelled by increased volumes, suggests that the bulls are in control. Gillette India's recent performance echoes its famous slogan, “The Best a Man Can Get", and with the bullish pattern in play, the stock seems poised for further gains.
Stocks like Hindustan Unilever, Colgate Palmolive, and Gillette India are showing significant bullish momentum, driven by both strong fundamentals and technical patterns. While the market environment remains dynamic, the FMCG sector’s performance reflects optimism about India's economic prospects and consumer demand.
Given these circumstances, it may be a good idea to add these stocks to your watchlist and see how they perform over time.
Note: The purpose of this article is only to share interesting charts, data points and thought-provoking opinions. It is NOT a recommendation. If you wish to consider an investment, you are strongly advised to consult your advisor. This article is strictly for educative purposes only.
Brijesh Bhatia has over 18 years of experience in India's financial markets as a trader and technical analyst. He has worked with the likes of UTI, Asit C Mehta, and Edelweiss Securities. Presently he is an analyst at Definedge.
Disclosure: The writer or his dependents may or may not hold the stocks/commodities/cryptos/any other asset discussed here as per SEBI guidelines.
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