FMCG stocks were the big movers between 2010 and 2014. Despite Nifty making no major moves between 2010 and 2014 - FMCG stocks embarked on the multi-year bull market post breakout during that time frame. It was a phase of structural Bull market in FMCG stocks (Consumption theme).
ITC broke out above 115 in Feb 2010 and then rallied to 400 by Dec 2014
Hindustan Unilever broke out above 320 in Oct 2011 and rallied to 960 by Jan 2015
The power of breakout was at work. I did cover it then:
Colgate Palmolive stock broke out above 235 and rallied to 1000 in following 4 years
Why HUL, ITC, Colgate - every other stock in FMCG space broke out and rallied like crzy be it Dabur, Emami, Godrej Consumer Products, Marico. This is the chart of Dabur from 60 to 300
This is Britannia breakout from 380 to 4000 levels in 4 years time frame
All the above charts visually explain how a structural Bull market in a sector looks like but then when stocks rally like this: they do two things:
1. They run ahead of itself and become very expensive on valuations...and hence earnings have to catch up. That takes time.
2. They are over owned and hence prone to sharp corrections. All they need is a trigger
The trigger point: New and Unique competition from Patanjali
Baba Ramdev Patanjali's products have now become mainstream and readily available everywhere. Baba Ramdev's partnership agreement with Big Bazaar can be inferred as the turning point for the organized established industry. And it's showing up on the chart. Remember, market prices the future. Most of the stocks have started correcting and look very vulnerable on charts. This is one sector that looks avoid right now because you never know how ugly correction can become in the sector
This is just my opinion but one should monitor individual charts for precise strategies. We cannot paint every stock with the same brush. For example: having said all the above: there will be traders betting on long side in the following stock just because of the chart pattern it presents.
The stock is Glaxo Consumer. The stock made a huge surge, pulled back and then has formed a double dip support at 50 dma. A trading rally can happen provided it does not break 6120 on closing basis. Please do not make any trade based on my writings. Always do your own due diligence
Disclaimer – The state of the market notes is Deepak’s perspective on the market. The column is purely for educational purpose. Nothing contained herein is a solicitation to trade or a recommendation of a specific trade. By reading this publication, you agree to make no trade relying in whole or in part on the comments of the writers