Tech view: Time to be bullish on consumption stks ahead of festive season?

With festival season round-the-corner, companies are hoping for a pick-up in the overall consumption, which along with the cut in corporation tax, would aid earnings growth over the next few quarters

Over the past few weeks, the government has announced a slew of measures across sectors in a bid to prop-up the sagging economic sentiment. With the festival season round-the-corner, companies are also hoping for a pick-up in the overall consumption, which along with the cut in corporation tax, would aid earnings growth over the next few quarters.

“Fiscal stimulus has finally come into play in form of corporate tax cuts. This will kick-start the virtuous cycle of consumption, private investments and boost growth. We believe tax cuts could boost GDP growth by 0.4-0.7 percentage points as corporate profitability increases,” wrote Sahil Kapoor, chief market strategist at Edelweiss Securities in a recent co-authored report with Shobana Krishnan and Ankita Pathak.

So, is it a good time to buy these heavyweight consumption sector stocks? Here’s what technical charts say:

Nifty India Consumption Index (NIFTYCONSU):  The index has breached its 50-weekly moving average (WMA) thrice in this fiscal at 4,769 levels. During the previous two times, it failed to give a sustained breakout, which resulted in a sell-off. Along with the trendline breakout, the index is now showing a fresh move. It did fill the gap-up area of 4,914 – 4,947 levels, indicating a modest correction as per daily chart but. Till the time the index is able to hold on to its 50-WMA, the outlook remains favourable.  Moving Average Convergence Divergence (MACD) indicator is in the process of climbing zero line upward, which indicates that the momentum may sustain. CLICK FOR THE CHART

Titan Company Limited (TITAN):  As the stock climbed to a new lifetime high, it found itself in an overbought territory on the Relative Strength Index (RSI). Fresh buying is expected above Rs 1,350 and the current levels may see the stock dip marginally. On the other hand, Rs 1,230 and 1,150 remain an immediate support for the counter. CLICK FOR THE CHART

Bata India Limited (BATAINDIA): The stock has risen over 50 per cent thus far in calendar year 2019 (CY19). There is not been much selling at higher levels. Technically, the charts are not showing any firm breakdown in the current momentum for the current month as well. The overall view remains positive with strong buying momentum. This counter can scale up to for Rs 1,520 and Rs 1,600 levels. CLICK FOR THE CHART

Hindustan Unilever: (HINDUNILVR): After experiencing “swing trades” around its 50-WMA, the counter has broken out to hit a new milestone. It has been considered as the safest bet during the uncertain / volatile markets and it should hold its positive momentum going ahead. On a bigger (monthly) time frame, Hindustan Unilever continues to trade with a ‘rising channel pattern’, which suggests further upside to Rs 2,200 and then to Rs 2,340 levels. CLICK FOR THE CHART

ITC Limited (ITC): A ‘double-bottom’ breakout at Rs 262, which is the neckline for the stock, may see the stock gain ground over the next few weeks. The recent uptick with rising volumes is displaying strength and a firm momentum. A breakout above Rs 262 should see the counter hit Rs 274 – its 200 DMA. There is support at Rs 248 and Rs 242 levels. CLICK FOR THE CHART

Britannia Industries Limited (Britannia): The stock has crossed its key hurdle of 100-DMA placed at Rs 2737, which it has been struggling to conquer since April 2019. As it trends higher, there are chances of profit booking. Till it trades above the 100-DMA, the upward momentum should sustain.  The immediate support comes at Rs 2,870 level. CLICK FOR THE CHART

Nestle India Limited (NESTLEIND): A breakout above Rs 12,300 levels showed tremendous buying momentum in this stock. It managed gain further traction and saw follow-up buying, which took it past the Rs 13,000 mark recently. Although, the counter is witnessing a minor profit booking, the overall view remains bullish. The immediate support range is 13,100 – 12,800 levels. CLICK FOR THE CHART