It was a Diwali cracker of sorts. Stock investors on Monday gave a rousing welcome to Diageo Plc. for its grand entry into United Spirits (USL) by buying USL stocks at exorbitantly high prices on a day when the market remained weak. On the first day of trading, after the deal was announced on Friday, the USL stock gained as much as 38 per cent amid a buying frenzy despite the fact that the open offer price for the stock has been fixed at Rs. 1,440, the same price at which Diageo had agreed to acquire 27.4 per cent stake in Vijay Mallya’s liquor company.
Since Monday morning the stock gathered buying momentum to touch the day’s high mark of Rs.1877.15, also its over four years high, to finally close at Rs. 1,834.60, up 35 per cent from its previous close. The appreciation in a single day was Rs. 475 as investors went long considering the company’s bright future ahead. Many brokerages have also upgraded their guidance on this stock since Diageo would be in a commanding role with 53.4 per cent holding when the deal is completed. On Friday before the deal was announced the stock had closed at Rs. 1,359.70 on the Bombay Stock Exchange. Some analysts believe that the stock will appreciate further. The stock had touched its two week’s low of Rs. 450 on January 12.
“The stock is under speculator’s control. Today a lot of short position has been covered,” said Kishor Ostwal, CMD, CNI Research. On Monday, United Breweries Holding plunged five per cent to close at Rs.129.25 and United Breweries by 4.48 per cent to close at Rs. 756.60. However, Kingfisher Airlines closed with a gain of 4.66 per cent at Rs. 14.16.