Street signs: Rains boost FMCG stocks, wealthy investors shun NCDs and more

No bottom formation yet  

The market may have bounced back in the past two trading sessions but experts are saying that we are far from forming a bottom. They say the latest 250-point jump on the benchmark Nifty isn’t supported by good volumes and index heavyweights, such as Reliance Industries, are looking weak on the charts. “The market had entered oversold zone and such a bounce was on the anvil. Traders can use this to cover their longs or create short positions,” said a technical analyst. The Nifty dropped nearly 1,100 points from 11,950 to 10,850 between July 4 and August 7, before recovering slightly to end at 11,110 on Friday.

Rains boost FMCG stocks

Some institutional investors have been building aggressive positions in select fast-moving consumer goods (FMCG) companies, including sector leader Hindustan Unilever, in the past few weeks. There is an expectation among investors that the rains will boost earnings for FMCG firms. "There is a scarcity premium for FMCG companies during the rains as goods get damaged and there is a need to replenish them," said an analyst who tracks the sector. Second, FMCG is traditionally considered a defensive bet and given the volatile market conditions the sector is considered to be a safe haven. UBS, JP Morgan, SBI Mutual Fund and DSP Mutual Fund are among the investors seen buying stocks in the sector.

Wealthy investors shun NCDs

High net-worth individuals (HNIs) don’t seem to be enthused by nearly half a dozen non-convertible debentures (NCDs) that are currently open for subscription. While the yields on offer are attractive, uncertain environment is weighing on their appetite. “In the past, HNIs have been big investors in NCDs. This time around we have seen muted response from them. Not many are expecting listing gains on the NCDs given the high volatility in the secondary market,” said a broker. Experts, however, say retail investors with long-term investment horizon can consider applying in NCD issues. They say yields could soften going ahead as the central bank has been easing rates.