Record HUL bearish bets signal stock drop

Bearish options bets on Hindustan Unilever Ltd (HUL) have climbed to an all-time high after the stock's surge to a record valuation surpassed even the most optimistic analyst forecasts.

The number of open options giving the right to sell HUL versus those to buy rose to 1.86-to-1 on July 17, the highest level since Bloomberg began compiling the data in 2001. The maker of Dove soaps and Lipton tea is valued at 41 times estimated profit after a 20 per cent rally this month sent the shares to Rs 702, exceeding the price targets of all 33 analysts tracked by Bloomberg and topping the mean estimate by the most ever.

The rally has surprised analysts and investors who sold 320 million shares for Rs 600 each on July 4 to Unilever, the London- and Rotterdam-based parent of India's biggest consumer goods producer. Macquarie Securities India says HUL is benefiting from a rural spending boost during the monsoon and increased investor demand for consumer firms.