Published on 27/05/2020 6:37:33 PM | Source: ICICI Direct

All Sector Update - Sectoral merry-go-round: Cyclicals to drive by ICICI Direct

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Sectoral merry-go-round: Cyclicals to drive


*  Healthcare stocks continue to outperformer as the index is currently placed in the Improving quadrant and has seen significant improvement in both relative and momentum term. We expect it to maintain its outperformance

* IT space has seen improvement in momentum and is currently rising from Weakening quadrant. As the IT stocks are rebounding from strong support area we expect it to outperform in the coming month

* Bankex and capital goods index are placed at Lagging quadrant. However, the stocks are placed at major support area and provides a favourable risk reward set up for a bargain buy opportunity in the coming month

* Oil & Gas stocks has seen relative performance and are currently in the improving quadrant. We expect the Oil & Gas stocks which are placed at an attractive level to provides a good bargain buy opportunity and are likely to outperform

* Metals is placed at the lagging quadrant. We expect them to continue with there relatively underperformance in coming month


Sectoral indices – Relative to benchmarks

Pharma Sector

Technical Outlook

* The healthcare index extended its outperformance through May 2020 while benchmarks consolidated 

* Relative ratio with Sensex continues to trend up and temporary breather if any is likely to find elevated buying demand supported by robust price structure

* Structurally, Aurobindo Pharma, Cipla, Sanofi, JB chemicals are expected to outperform while Lal Pathlabs, Pfier, Granules to provide favourable riskreward setup


FMCG Sector

Technical Outlook

* The FMCG index took a breather in May, while holding April lows indicating renewed buying demand near supports.

* On relative terms, ratio spread continues to mark rising trend which makes us believe that index is likely to resume its relative outperformance in June after a subdued performance in May

* We expect Britannia, Tata Consumer to outperform while Hind Unilever, Havells, Astral Poly offer favourable risk-reward setup


IT Sector

Technical Outlook

* The IT index extended consolidation in May after a shallow retracement of April gains resulting in a higher bottom formation and looks set for a further up move towards 15000 levels

* On relative terms, ratio is poised for a multi year breakout. We expect index to continue its outperformance as index heads for target of 15000 levels

* Amongst stocks TCS, L&T Infotech is expected to outperform on relative basis while Affle India, Mindtree offer favourable reward risk setup


BSE Capital goods Index

* Capital Goods Index went into a base formation after bouncing from key trend line connecting 2009 and 2014 lows, placed around 10000 levels. We expect index to undergo base formation around this support in coming month

* The sector is expected to continue its relative under performance in coming weeks, while stock specific action is likely

* That would provide bargain opportunity in L&T, Thermax, Ramco Cement


BSE Oil & Gas Index

* The index is marking time after retracing 2016-2017 rally (7987- 15628) by 80% and expected to undergo base formation amid extreme oversold readings

* Going forward, we expect the index to underperform on relative terms while stock specific action is likely to continue.

* Gujarat Gas, Petronet LNG could relatively do well. While, BPCL and MGL are likely to pose technical pull back


Metal Sector

* The decline in Metal Index from its 2018 peak has achieved equality in magnitude of fall with 2010-2013 decline, both measuring 66% from top value

* Structurally, the metal index is forming a lower peak-trough formation and technical pull backs due to oversold condition are likely to be short lived. We expect relative under performance to continue while index undergoes base formation


Auto Sector

Technical Outlook

* The Auto index has approached its key support marked by 61.8% retracement of 2011-2017 rally (7941-27031) and seen marking time there

* Going ahead, we believe the index to pose extended pull back after a consolidation in May. Two wheeler and tractor stocks are likely to outperform on relative basis

* Stocks likely Escorts, Hero Motocorp, Balkrishna Industries are likely to outperform. Meanwhile, Maruti, Ceat offer bargain buy opportunity


Realty sector

Technical Outlook

* The Realty sector index continued to form lower high-low as it breached March-April lows, indicating continued weakness

* We expect sector to continue its under performance due to weak price structure and technical pull backs if any due to oversold prices, are likely to be short lived. Further relative ratio of sector has given a breakdown below multi year support levels indicating relative underperformance for extended period of time

* We advise to wait for stability to emerge before venturing into bargain buying in this space


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