Trent, DMart: Retail stocks resilient amid market volatility; time to buy?

Shoppers Stop is expected to rise 15 per cent, while Avenue Supermarts, may decline on breakdown of support.

Retail and consumption related stocks were exhibiting strong trends on Wednesday, even as benchmark indices languished in the red amid tepid global mood. Shoppers Stop, Sapphire Foods India, and Trent advanced up to 2.5 per cent in intra-day trade, while Westlife Development, and Avenue Supermarts held decent gains.

According to analysts at ICICI Direct, retail sector appears to be on the cusp of delivering strong sustained revenue growth driven by improved consumer sentiment, wardrobe refresh, and increased spend on discretionary purchases.

"Multiple levers like business scenario normalisation and improvement in consumer sentiments are expected to buoy demand despite inflationary challenges in the near-term," they said in a report dated June 26.

The brokerage expects revenue of companies in their coverage universe to grow at a CAGR of 26 per cent over FY22-24E. The recent stock price correction, it said, offers good entry point to accumulate companies having healthy balance sheet, pan India presence, and sustained long term revenue and earnings growth prospects.

Against this backdrop, here's the outlook for retail stocks: 

Shoppers Stop Ltd (SHOPERSTOP) 

Likely target: Rs 550

Upside potential: 15%

A "Golden Cross" formation points at a bullish upside for shares of Shopper Stop, according to the weekly chart. Moreover, "Higher High, Higher Low" pattern adds more strength to the bullish bias. Thus, as long as the stock holds its medium-term support of Rs 400, the pullback rally could see Rs 550. Though there is divergence on the weekly chart, the stock is not letting bullish undertone to be tamed. CLICK HERE FOR THE CHART

Trent Ltd (TRENT)

Outlook: Support range of Rs 980 to Rs 960

As long as the support range of Rs 980 to Rs 960 is held, the price action could see a sharp pullback from the weakness seen during the month of May, according to the weekly chart. Indeed, both the leading technical indicators, Relative Strength Index (RSI) and the Moving Average Convergence Divergence (MACD), are trending downward, but the price action is pointing at the crucial support mark. CLICK HERE FOR THE CHART

Westlife Development Ltd (WESTLIFE)

Outlook: A rally towards 200-DMA

While the scrip trades under the 200-day moving average (DMA) of Rs 511, the current formation could be evolving "Inverse Head and Shoulder" pattern. The Moving Average Convergence Divergence (MACD) trades over the zero line, signalling momentum to be supportive of the upside. The support comes at Rs 440 levels, which needs to be honoured on the closing basis. Once that happens, the stock could a rally towards 200-DMA. CLICK HERE FOR THE CHART

Sapphire Foods India Ltd (SAPPHIRE)

Outlook: Needs to overcome Rs 1,200 

Sapphire Foods' stock needs to cross the hurdle of Rs 1,200 to explore fresh upmove. On the negative side, the support of Rs 1,000 remains a key denominator. Breach of the same could mean further downside and aggravated selling pressure. CLICK HERE FOR THE CHART

Avenue Supermarts Limited (DMART)

Likely target: Rs 2,800 (if it breaks Rs 3,200)

Downside potential: 12%

Shares of Avenue Supermarts have plunged 25 per cent on a year-to-date basis, and have sunk over 40 per cent from their historic peak of Rs 5,900 recorded in October last year. The bearish formation of "Death Cross" has engulfed the stock entirely, shows the daily chart. Hence, as long as the stock trades under Rs 4,200 levels, the outlook remains bearish. Avenue Supermarts has obstacles at Rs 3,600 and Rs 3,900 level. Besides, if the stock breaches Rs 3,200 levels on the downside, the selling pressure might take this stock to Rs 2,800. CLICK HERE FOR THE CHART