Street signs: Nifty set for consolidation, 'biz as usual' stocks, and more

Nifty set for consolidation

The benchmark indices ended marginally lower last week after sharp gains in the preceding two weeks. Technical analysts say the markets are poised to enter the consolidation phase. “The Nifty has met with stiff resistance above 9,300. On the other hand, it seems to have solid support at around 9,100. Looks like the index could gyrate between these two levels,” said an analyst, adding that the closing of the India VIX below 40 is a sign of stability. Market players said such a consolidation could be healthy for the markets as it might form a base to inch towards 9,700.

Sundar Sethuraman

‘Business as usual’ stocks

Investors are scouting for stocks which have seen little or no disruption in their business activity. With the valuation of pharma and FMCG pack turning rich, investors are now looking for stocks outside this universe. Experts believe stock exchanges could be one such theme. The BSE and the MCX have slightly outperformed the benchmarks over the past one month. Shares of the BSE have gained 27 per cent, while the MCX is up 24 per cent as compared to a 20 per cent rise in the Sensex. “The BSE’s cash reserves and attractive dividend yield makes it a decent bet. The exchange has not seen any halt in business activity during the lockdown,” says an analyst.

Sundar Sethuraman

Smoke and mirrors 

 

Shares of ITC have lagged the FMCG pack over the past two months. While most peers, such as Hindustan Unilever and Nestle India, have scaled all-time highs, shares of ITC, despite its relatively low P/E and high dividend yield, continue to languish. The underperformance has surprised many on the Street. The pain point could be ITC’s mainstay business of cigarettes, sale of which is not permitted during the lockdown. Further, a survey by domestic brokerage IIFL revealed 73 per cent smokers don’t plan to restart smoking even after the lockdown ends. “While ITC stock is attractive on several parameters, it is being ignored by the market. It remains to be seen how the cigarette business shapes up after the lockdown ends. It is unlikely people will give up smoking that easily,” said an analyst.

Samie Modak