Ranbaxy to see constant supply at higher levels

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Ranbaxy to see constant supply at higher levels

Ranbaxy is not exactly the cheapest stock on the block, either the big trigger is done, open offer is over. You will get these sporadic moves up because some people will keep buying a blue chip like it and will give you Rs 20-30 bounces. But there will be constant supply at higher levels now.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » ALSO READ See what other CNBC-TV18 anchors have to say Nifty BSE | NSE 25/05/12 Are Mutual Funds betting on Nifty?

Here is a transcript of Managing Editor, Udayan Mukherjee comments on Ranbaxy Labs on CNBC-TV18. Also see the accompanying video.

You have seen 10 crore shares have come back from the Ranbaxy 's open offer yesterday and I don't think even 1 crore shares got traded yesterday on the Ranbaxy counter. So there could still be lot of pent up pressure from investors who have got the stock back from the open offer. One out of three or between one out of three and one out of two bought in at Rs 737 per share and the other one is in their Demat account now, which can fetch only Rs 300 per share. It cannot be a very happy situation for investors now whether they will bailout at this price or wait for some recovery is a million dollar question.

But I suspect looking at futures position, which is still there in the current series that you might see some pressure in the next couple of days on Ranbaxy, may be towards the end of the settlement. And in any case given the amount of stock, which has returned, there could be constant supply at higher levels, even if the stock were to stage a recovery.

The problem as we were discussing with Ranbaxy is that even after the crunching fall that it's had, is not terribly cheap. I think most brokerages are talking about earnings being something like Rs 16-17 next year that is five quarters forward by the way for Ranbaxy, to end 2009 calendar. And at Rs 16-17 earnings, give or take a rupee here or there you are at Rs 310, so just short of 20 times five quarters forward after the fall that you have seen.

So it is not exactly the cheapest stock on the block either, the big trigger is done, open offer is over. You will get these sporadic moves up because some people will keep buying a blue chip like it and will give you Rs 20-30 bounces. But there will be constant supply at higher levels now and I don't know whether the stock is going anywhere in a hurry.