ITC vs Dabur: Which stock is a better pick in volatile market?

ITC vs Dabur: Which stock is a better pick in volatile market?

ITC vs Dabur: While ITC shares have rallied 63 per cent this year, Dabur India stock has slipped 7.67 per cent during the period

ITC vs Dabur: Though Dabur India has not displayed an up move similar to ITC, it remains a more favoured stock to buy, according to analysts ITC vs Dabur: Though Dabur India has not displayed an up move similar to ITC, it remains a more favoured stock to buy, according to analysts

Shares of ITC and Dabur India are among the key stocks, which have attracted investor interest in the FMCG sector in the last few years. ITC stock, which was considered a defensive bet in 2021, has changed gears with the scrip rising 63.3 percent in 2022. The stock which stood at Rs 201 in January 8, 2021 hit an all-time high of Rs 361.9 today , translating into gains of 80 per cent during the period. Before January 8 last year, ITC stock had majorly traded below the Rs 200 mark for a year due to the Covid-19 lockdown announced by the Modi government.

In the last one year, ITC shares have rallied 55 per cent with analysts citing increasing penetration of its FMCG business behind the positive sentiment.

On the other hand, shares of Dabur were trading flat at Rs 554 in the afternoon session today.

The Dabur India stock has rallied 10 per cent in the last six months.  In a month, the stock has gained 6%. However, the FMCG stock has lost 7.67 per cent in a year and fallen 4.55 per cent in 2022.  In over four and a half years, Dabur India shares have climbed 74 per cent.

Though Dabur India has not displayed an up move similar to ITC, it remains a more favoured stock to buy, according to analysts.

Tirthankar Das, Technical & Derivative Analyst, Retail, Ashika Stock Broking is bullish on the Dabur India stock when it comes to technical analysis.  He finds ITC overbought.  

Also Read: SBI, ITC, Adani Ent: These 11 bluest of blue chips hit all-time high since October; which stock to buy now?

“In the FMCG sector, both stocks had been a consistent multiplier and witnessed a steady and gradual rise in price. However, in recent periods, ITC has witnessed a rather sharp rally leading to an overbought condition compared to Dabur. Both the stocks in the recent period have taken support from their long-term rising trendline and have been on a steady uprise. However, on the oscillator front due to the recent sharp rally, ITC is presently trading in an overbought price region indicating the possibility of price consolidation at the current level. With Dabur, the momentum indicator RSI (relative strength index) is moving near 60 levels, which reaffirms that positive momentum of the index for the short-to-medium term is likely to remain," said Das. 

 "ITC though trading at its all-time high, might face resistance from its previous swing high of 368 against which a temporary breather can be seen. Dabur is presently on the verge of giving a breakout from the downward sloping trendline adjoining the highs of Sept’21 and Aug’22 at 580-585, a breach of which might be extremely positive as the said level is analogous to a breakout of bullish ‘Diamond’ formation and Bullish ‘Harmonic ABCD’ formation as well. The volume trend has shown an accumulation in Dabur for the past few days thus indicating an increased enthusiasm to push prices higher while the latter lacks volume participation. Hence, we expect that Dabur will witness a strong up move and head initially towards the immediate swing high of August 2022 i.e. at 602 (61.8% retracement of the Sept 2021 decline) followed by a 660 swing high of October 2021, ”added Das.

Also Read: India’s FMCG biggies' biggest hurdle: Faltering consumption in rural market

Abhijeet from Tips2trade is also of the view that ITC is overvalued and is likely to see correction.

"Even though ITC stock price has done exceedingly well this year giving stellar returns to its investors, the stock is technically overvalued and a correction till 305-310 looks possible. Hence, Dabur could outperform ITC in the near term. Technically, Dabur looks good on the charts but needs to close above 575 on the daily charts for a sustained rally up to 615-625 in the near term, " he said.

However, Ravi Singh, vice president and head of research, Share India favours ITC stock over Dabur.

“ITC is a much better pick than Dabur due to its steady performance in quarterly numbers taking cues from the demand recovery in cigarette and hotel business, cost optimisation and trending sales momentum in the FMGC sector. Stability in taxes on cigarettes, backed by deterrent actions by enforcement agencies, enable continued volume recovery. The stock on the technical setup is also exhibiting bullish trend on daily chart. Investors may hold their positions for a target of 380 - 400 levels in coming sessions. Weak demand trends across categories and high-inflation has impacted Dabur’s business numbers and fall recorded in revenue growth. Gross operating margins are also expected to fall on a year on year basis. The health supplement segment has also recorded degrowth. Dabur share may show some recovery taking cues from positive underlying trend and touch the levels of 565 in near term,” said Singh.

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Published on: Nov 11, 2022, 3:17 PM IST
Posted by: Priya Raghuvanshi, Nov 11, 2022, 3:12 PM IST