Liquor stocks rally as retail sales get nod | Economic Times

Mumbai: Shares of breweries and distilleries rallied as much as 17 per cent on Monday bucking the broad-based selloff after the central government allowed opening of liquor shops with certain riders. However, analysts believe the gains may not sustain due to supply issues after initial pent up demand gets over. Moreover, they see these companies taking a hit of 10-12 per cent in the ongoing financial year because of the lockdown due to the pandemic.Associated Alcohols & Breweries surged 16.8 per cent to close at Rs 198.50 while Radico Khaitan closed 7.7 per cent higher at Rs 316.60. GM Breweries ended up 14 per cent at Rs 427 and United Breweries ended up 3.4 per cent at Rs 970.10. Shares of United Spirits rose 4 per cent intraday but gave up most gains on profit booking to end up 1 per cent at Rs 541.60.Liquor shops reopened on Monday in red, orange and green zones with several guidelines in place amid the lockdown.“There will be pent up demand in the first week as shops were shut for 45 days. People don’t know if lockdown will come back again,” said Abneesh Roy, senior vice-president, institutional equities at Edelweiss Securities.Analysts believe that supply-side issues are unlikely to get over soon as liquor factories were also closed for several weeks.75545644Roy of Edelweiss believes the tax overhang could also haunt liquor manufacturers going ahead.“They (state governments) are short of revenues so they will keep increasing taxes. The rally is a good time to sell these stocks...I see a 10-12 per cent impact on current (financial) year earnings of these companies,” said Roy.Analysts said liquor shops are still shut in several states. Kerala state government on Saturday has decided to keep liquor shops shut. Even as liquor shops were opened in Delhi, police shut down these stores in the capital, hours after they opened, due to crowds.