Derivative traders mount bearish bets, go 'short' on HUL

MUMBAI: Derivatives traders mounted bearish bets on Hindustan Unilever (HUL) on Tuesday on expectations its shares could extend the recent weakness amid worries about moderation in its volume growth. Analysts said valuations were steep after the stock's recent gains and earnings downgrades could weaken the shares further.

"Short positions were created in HUL on anticipation of selling in the cash market," said Siddarth Bhamre, head-derivatives, Angel Broking. "Strong hands are invested in defensive stocks like HUL and ITC. Post-results, they want to exit," he said.

HUL shares have fallen almost 5% in the past two days to 382.10 on Tuesday after its Q3 revenue growth fell below Street expectations. While some short positions in the HUL stock futures were initiated on Monday, most build-ups happened on Tuesday.

"Monday's reaction was mixed...it seems traders took time to digest the results. We see a support for HUL around 370," said Gaurav Mehta, derivatives analyst at Ambit Capital. Analysts are also pessimistic about the HUL stock's prospects in the near term. "If it breaches the 376 level, then further selling could bring it down to 362," said Dharmesh Shah, technical analyst, ICICIDirect.com.

In 2011, when the Sensex fell 25%, HUL gained over 30%. But analysts feel such optimism is overdone.