Excuse my play on words in the title, but I wanted to make the point that at 13% of the Nifty 500, the Fast Moving Consumer Goods Index is a big part of the bull case for Indian stocks.
We’ve talked about weak participation in this sector and since then it’s deteriorated further as opposed to getting better.
Here’s the Equally-Weighted vs Cap-Weighted Nifty Fast Moving Consumer Goods Index approaching its 2018 lows, signaling a continued weakening of breadth in the sector.
Click on chart to enlarge view.
Here’s an overlay of the two, showing the continue relative weakness of the Equally-Weighted Index.
ITC Ltd., roughly a third of the FMCG Index, is rangebound as momentum diverges with each new highs. If the largest component of the sector is a rangebound at best, it’s going to be hard for the space to gain any traction.
Meanwhile other leaders like Hindustan Unilever have held support, but are unable to gain any meaningful upside momentum.
Britannia Industries was one of the best stocks in the space, but remains below resistance and is slowly starting to roll over.
Dabur India Ltd. was one of the strongest stocks for a long time, but it is rangebound and remains weak.
If the largest stock in the space is rangebound and the other leaders are unable to gain any traction, it’s gonna be tough for Consumer Goods to move higher.
And that’s a major headwind for the broader market.
Thanks for reading and let us know if you have any questions!