L&T scrip confronts rough weather

NetScribes/Salil Panchal and Janaki Krishnan

The Larsen & Toubro counter has seen some rough weather over the past two trading days. At the Bombay Stock Exchange, the stock moved up marginally on Friday to close at Rs 200.5 against its previous close of Rs 197. The L&T counter witnessed trading in nearly 23.02 lakh shares.

The counter has witnessed extreme volatility over the past few days at both the upper and lower end of the stock price. On Thursday, the scrip had slid sharply by 8 per cent from Wednesday's close of Rs 215.

According to the stockmarket grapevine, a large corporate house dumped a huge quantity of L&T shares on Thursday. On Friday, a section of the market, led by a local operator (who is currently keeping a low profile) was said to have sold heavily at the counter. This has led to increased bearishness at the counter.

Several factors have led brokers and analysts to re-rate the L&T stock. There is a perception that the L&T software division may not command strong valuations as it is not being seen as a profitable venture. The government's announcement of a proposed hike in petroleum products is also likely to impact investment interest at the counter.

The main reason for the recent volatility in the L&T stock is the arbitrage potential available at the counter through the prices at the overseas GDR market and the Indian market. On Wednesday, in the London markets, the L&T GDR was quoted at $ 10.38, which works out to a 9.81 per cent premium to the then ruling price of Rs 215. The market has, thus, witnessed marginal buying of the underlying share at the local markets and selling pressure at the international markets. Analysts tracking the GDR markets say the trends are likely to reverse over the next week, when there would be buying into the L&T GDR and selling pressure for the stock here.

L&T recently announced it had bagged two contracts worth Rs 530 million in Qatar. The projects are a 25,000-capacity sports stadium at Umm-Al-Afaai and a 20,000-capacity stadium at Gharaffa in Doha. Despite this, a large section of the market is currently of the view that the stock will remain range-bound over the next few months, with little trading interest at the counter.

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