Market report: Ocado hit as sell-off continues

The price war among the supermarkets “could lead to permanently lower industry gross margins”, the analysts said.

Ocado is likely to respond by cutting delivery fees, which could in turn slow down its international expansion.

“It will be challenging for Ocado to improve its retail profitability in this highly competitive UK grocery market [and] international retail clients may begin to view any investment in online grocery as less compelling or urgent.”

Repeating their “sell” advice, the Deutsche experts slashed their target price to 350p, from 440p. As a result, Ocado dropped 27.3, or 7.2pc, to 349.7p – the heaviest faller among London’s 350 biggest companies.

The grocery delivery company, which has never made a profit, surged 410pc in 2013 and hit a record 617p less than two months ago, but has since slumped as investors turned against tech and web-based companies. That sell-off showed no signs of abating on Monday.

Like last week, anything that had enjoyed a strong rally in recent months was on the back foot, as investors took profits from shares on lofty valuations.

Equipment rental group Ashtead, which had touched a record high on April 4 and had surged 78.3pc over the course of last year, slumped 38, or 4.3pc, to 842p.

Likewise, Barratt Developments and Persimmon, the two housebuilders that were propelled into the FTSE 100 by Britain’s resurgent property market, fell 14.8 to 371½p and 36p to £12.79. respectively. Retail broker Hargreaves Lansdown tumbled 50p to £12.07, having reached an all-time high in January.

Tech companies remained under pressure, with electronics components maker Laird sliding 10 to 289.8p and microchip designer Imagination Technologies down 2.8 at 196.9p.

The same went for the broader mid-cap FTSE 250. Having repeatedly hit new heights throughout 2013 and early 2014, the index fell heavily last week and lost 3.3pc.

That trend continued on Monday, with the second-tier sliding 195.95 points to 15,702.42, a 1.2pc drop.

The FTSE 100 fared better and rose 22.06 to 6,583.76, helped by encouraging results from American giant Citigroup.

Consumer staples were in demand, favoured for their defensive qualities. Diageo added 44½p to £19.17, Cillit Bang and Dettol maker Reckitt Benckiser rose 99p to £48.33, British American Tobacco put on 58½p to £34.51 and Imperial Tobacco advanced 27p to £24.74.

Commodities giant Glencore Xstrata was another strong riser, closing 6.3 better at 317.9p on news it was selling the Las Bambas copper mine in Peru to a Chinese consortium for a better-than-expected $5.85bn (£3.5bn), which raises the prospect of a cash return.

Glencore also pleased investors by revealing it would buy Caracal Energy, the oil and gas group that operates in the central African republic of Chad, for £807m.

Caracal jumped 188 to 530p and Tullow Oil, the Africa-focused explorer, climbed 32 to 859p on hopes that it, too, will attract a suitor.

Chilean copper miner Antofagasta rose 17 to 842p following the Las Bambas deal, which underscored China’s voracious appetite for the metal.

On Aim, Cupid, the internet dating group, slipped ¼ to 45½p after hedge fund Toscafund dumped its entire 16pc stake, some 11.2m shares. The disposal came less than a fortnight after the company reported that it had swung to a full-year, pre-tax loss of £7.9m, from a £9.2m profit in 2012.

Elsewhere on the junior index, Versarien, the engineering materials group, climbed 2.7pc, a gain of ¾ to 28¾p, on the announcement that it is spending £440,000 on an 85pc stake in University of Manchester spin-out 2-DTech, a developer of graphene products.

Dubbed by some as a “wonder material”, graphene is a one-atom thick layer of carbon that was first isolated at Manchester and extracted from graphite. Researchers think the material could be transformative, and investors, excited by the possibilities for its use, piled into Applied Graphene Materials at its float last year and sent the shares up almost 40pc on its debut.

Haydale Graphene Industries, a developer of technology to commercialise graphene, met a much more muted response on its first day of trading on Aim on Monday and closed at 192p, down from its 210p placing price.

Traders said the recent negative sentiment towards flotations weighed on the stock, as did uncertainty about Haydale’s broker, Hume Capital Securities.

Hume disclosed on Monday that it had stopped market making in the short-term because “growth in other areas will generate higher returns for shareholders”. That had removed key support for Haydale on its debut, dealers said.

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