Street Signs: Rural-focused themes in focus, Block deals slow, and more

Green shoots: FMCG stocks bloom on rural renewal expectations

Brokers are advising their clients to build long positions in fast-moving consumer goods (FMCG) stocks, anticipating higher allocations for social sector schemes in the upcoming Union Budget. Over the past month, the National Stock Exchange Nifty FMCG Index has rallied by 8 per cent, outperforming the Nifty, which has gained 4.3 per cent. “Given the election promises and recent state Budgets, we can expect a larger outlay for social sector schemes. This will support the ongoing cyclical recovery in rural consumption. Additionally, a favourable monsoon this year will boost rural sentiment,” said an economist.

Braking the buying surge: MFs, investors take foot off the gas

After record share purchases in recent months, mutual funds (MFs) have eased off the buying pedal. Domestic funds have been net sellers for four consecutive sessions ending June 18, pulling out over Rs 4,000 crore during this period, according to Securities and Exchange Board of India data. The decline in MF buying could be chalked up to several factors, including profit-taking by investors or some fund houses setting aside funds due to Budget uncertainty. Changes in the asset allocation of hybrid funds also impact MFs' equity market deployment. Last month, MF deployment halved compared to the record levels in May, despite equity inflows reaching a new high. MFs bought equities worth around Rs 20,000 crore in June, down from Rs 48,100 crore the previous month.

Trading timeout: Block deals hit the brakes before the big reveal

Block deal activity has ground to a halt ahead of the Budget. On Friday, no company in the top 500 reported any block trades. Overall, block deal activity over the past week was subdued. Investment bankers attribute this slowdown to investors being in a wait-and-watch mode, mainly concerned about potential changes to the capital market tax structure. “In the first six months, we saw record block deal transactions, averaging over Rs 2,000 crore a day. The slowdown is not surprising for two reasons: Firstly, valuations, especially in broader markets, have become lofty. Secondly, a negative surprise in the Budget could lead to a knee-jerk reaction, resulting in mark-to-market losses,” said a banker.