Among online delivery platforms, shares of Eternal (Zomato) and Swiggy each ended 1% lower after declining as much as 5%.
War Begins to choke Supply disruptions have hit kitchen operations in some areas, though the impact on large QSR chains is limited so far
Westlife Foodworld, operator of McDonald’s restaurants in West and South India, slipped about 3%, Jubilant FoodWorks, a franchisee of Domino’s brand, fell nearly 2.4% and Speciality Restaurants, owner of multiple restaurant chains, ended 0.2% lower.
“The decline in food delivery and QSR stocks appears to be a knee-jerk reaction to concerns around a potential shortage of commercial LPG cylinders and the possible disruption it may cause to restaurant operations,” said Nirali Bhansali, equity fund manager at Samco Mutual Fund.
According to Sunny Agarwal, head of fundamental research at SBI Securities, feedback from restaurant owners suggests LPG supply disruptions have begun affecting kitchen operations in some places, although the impact on large listed QSR chains is likely to be limited.
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“Many restaurant owners have indicated disruption in the supply of LPG and the likely impact on smooth operations,” Agarwal said, adding that organised QSR chains are relatively less dependent on commercial LPG cylinders as they often rely on electric ovens and other cooking equipment.
Technical indicators are flashing signs of a pullback in Eternal Ltd and Jubilant FoodWorks. “Technically, on the short-term time frame, Eternal is forming lower highs and is trading comfortably below short-term averages, which is largely negative,” said Amol Athawale, vice-president, technical research at Kotak Securities.
So far this month, Eternal Ltd shares have corrected more than 10%.
If the stock succeeds in trading above the 210-215 range, the pullback could extend towards 235-240. On the other hand, below 210 the sentiment could turn negative, in which case traders may prefer to exit long positions, Athawale said.
Jubilant FoodWorks slipped below its crucial support zone of 480, after which selling pressure intensified. “As long as the stock remains below ‘480, the weak formation is likely to continue on the downside, with potential retests of 450 and 440,” he said.