The Hindu Business Line : HLL turns contrarian in a falling market

THE HLL stock on Thursday was the only exception among the Sensex's weighted counters. The stock, which moved by 3.31 per cent price wise, had been sliding steadily since March 1 till Wednesday's closing, putting downward pressure on the Sensex.

The stock, with a weightage of approximately 5.53 per cent in terms of market capitalisation on the Sensex, had slipped by Rs 24.60 from March 1 to March 10 closing at 149.35, but it had notionally dragged the Sensex down by around 50 points during this period, Mr Ajay Jaiswal of Lohia Securities pointed out. Today's upward move in the stock notionally influenced the Sensex by around 10 points upwards.

According to dealers, LIC is understood to have come in as a buyer in the stock early during the session, which saw the HLL sail through with a gain. Other top Sensex counters opened substantially lower and finished losers.

A dealer with an institutional brokerage said that the Re 1-HLL stock, over the last few months, have been seeing a gradual reduction in the holding by FIIs and MFs. HLL's market value erosion has been causing concern for many fund managers as it has been reducing the net asset value of the schemes on which it existed. "But at the current level, for many, selling would mean booking losses. Moreover, some still consider it to be a defence bait and used the counter as a hedge against other counters as also in managing market volatility," a fund man commented.

According to Mr Nikhil Thacker, HLL has lost its status of a proxy play for the FMCG. "For the long-term investors, the listed FMCG stocks do not look very promising because the sector no longer thrives on margins but volumes. Large players such as HLL or P&G are finding it difficult to achieve acceleration in volume growth due to severe competition put up by small players. The rural market has not responded to the price cuts or ad blitz; in fact FMCG seems to have lost out to white goods and two wheelers in the rural market in terms spending priority," he added.

According Ms Priya Madani of Anagram Stockbroking, P&G's proposed launch of toothpaste has also been a negative development for the sentiment of HLL stock. However, today's decent rise in price and volume suggest that some of the investors might have found the valuation attractive. The stock traded at 18.8 times its 2003 EPS of Rs 8.2.