Large-cap index stocks Reliance Industries (RIL), Hindustan Unilever (HUL) and Larsen & Toubro (L&T) lost between 2 and 3 per cent each over their previous close on Wednesday.
Analysts believe this to be a short-term blip and strongly feel that the long-term story is intact and that the fundamentals are in place.
These stocks were beaten down for a variety of reasons. For instance, RIL had reduced its gas output guidance for FY11 from 80 mmscmd to 60 mmscmd and for FY11 at 80 mmscmd at their Q1 analyst meet, said an equity analyst.
The fact that RIL overstepped on projections and the expectation of this delay in project execution has given people a reason to short the stock. For the RIL stock, Rs 1,045 was an important level and that has been breached. So expect some more pressure coupled with sideways movement,” said Mr Prakash Diwan, Head, Institutional Equity, Net Worth Stock Broking.
Result updates from some of the brokerages have pointed out that the delay in gas ramp-up is a dampener for RIL.
Another set of market players said that this could be an unwinding of long positions a day prior to F&O (futures and options) expiry and that better results expectations was the reason for build up in the stocks of RIL, HUL and L&T.
Ad spends and input costs have hurt HUL, say analysts. “Increase in the ad spend by 30 per cent year on year due to new brand launches and continuous increase in agri-commodities (prices) have taken its toll. Plus the inability to pass on costs to their customer has been their undoing,” added Mr Diwan.
Mr Alok Agarwal, Head of Research, Mata Securities, had another point of view to offer. He said, “HUL is already well owned by institutions. With Q1 numbers not encouraging, don't expect any further buy in.”
The late start to the capex cycle seems to have hurt L&T the most say analysts. “In spite of a good order book, late government disbursals for capex, and a delay in private sector capex resulted in a below expectation Q1 performance. Even a healthy margin could not save the stock from being beaten down; a sure sign of an overreacting street,” said Mr Diwan.
RIL closed at 1,021.25 (down 3.06 per cent), L&T at 1,823.65 (down 2.15 per cent) and HUL at 252.35 (down 3.09 per cent) on the NSE today.
“The more they fall, the better it is for the buyer as these are real blue chip companies to own,” added Mr Agarwal.
