UPL top drag on Nifty, falls 2% to hit 52-week low; here's why

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UPL share price touched new 52-week low and was down nearly 2% on Tuesday's trading session. The stock was one of the top losers in the Nifty 50's with 2.16% decline. UPL shares opened at intraday high level of ₹659.90 apiece on BSE.  Analysts claim that the street is anticipating poor performance in Q1 FY24 due to the severe headwinds the agrochemical business is experiencing in both domestic and international markets.

According to Avinash Gorakshakar, Head Research of Profitmart Securities, in domestic markets excess inventory in the system since December 2022 has seen most players reporting a sharp fall in performances as prices corrected sharply. "Hopefully a recovery is expected after September this year. But since first half is the main period for agrochemicals this season, and its lost now.

Internationally, also demand is soft from markets like Europe Latin America which is another challenge. Hence, the weak market sentiment in UPL," added Gorakshakar. Brokerage Elara Capital in its recent sector Q1FY24 preview report noted that domestic agrochemicals breathed a sigh of relief when the monsoons finally arrived, despite the delay, as sales increased after the rains.  The trade channel was cautious in booking material as a result of the prolonged dry weather in Q1, especially considering the substantial carry-over inventories from the previous season.

This, combined with falling agrochemical prices, resulted in sluggish sales and pessimistic attitudes among market participants. The brokerage highlighted in its analysis that the price performance of UPL will decline by 8.7% in three months, 7.7% in six months, and 2.9% in a year. On the technical front, as per trendlyne data, the stock price fell 6.3% and