Shares of Reliance Industries Ltd. dropped by over 10% in just four days, leading to a loss of approximately Rs 2.1 lakh crore in market capitalisation.
The company’s recent performance has raised alarms among analysts, with Ambit Capital Pvt. maintaining a “sell” rating on RIL, citing a lack of visible growth drivers.
Ambit Capital, while reaffirming its sell recommendation, slightly adjusted its target price for RIL from Rs 2,600 to Rs 2,650 per share. However, this target still represents a 9.5% discount compared to the stock’s closing price on Oct. 1.
Analysts from Ambit emphasised that the path to monetising its deleveraging strategy through infrastructure investment trusts remains unclear, raising concerns about the return on capital employed across various segments. They highlighted that the profitability of RIL’s consumer businesses could diminish if the subsidised services provided by standalone-funded entities were withdrawn.
Meanwhile, the global oil market is experiencing turbulence as geopolitical tensions escalate in the Middle East. Oil prices have surged, with Brent crude $80 a barrel amid fears of a possible Israeli retaliation against Iran following a recent missile attack.
The options markets for oil are showing a continued bias toward bullish call options, which benefit buyers when futures prices rise. A gauge of implied volatility for brent crude approached its highest level in nearly a year, and money managers increased their net-long positions in the global benchmark, according to Bloomberg.
US President Joe Biden has commented on the situation, indicating uncertainty about when an Israeli response might occur and suggesting that military action against oil fields may not be the preferred option. As military operations intensify in Gaza and Lebanon, concerns grow over potential disruptions to oil supply, particularly from Iran, which has restored its oil output close to full capacity.
Shares of RIL closed 1.17% lower at Rs 2,740.70 apiece, as compared to a 0.87% decline in the benchmark NSE Nifty 50.
The stock has risen 6.05% on a year-to-date basis. Out of the 36 analysts tracking the company, 25 have a ‘buy’ rating on the stock, eight suggest a ‘hold’ and three recommend ‘sell’, according to Bloomberg data. The average of 12-month analysts’ consensus price target was 20.2%.