Mumbai: Reliance Industries Ltd (RIL) lost nearly Rs 1 lakh crore in market value in the past five sessions as the nervous mood in the market and bearish commentary from some brokerages pulled the stock down 11 per cent.
The company lost its top position as the countrys most valuable company by market capitalisation on Thursday with Tata Consultancy Services (TCS) regaining the spot for the first time since January 10.Analysts said foreign portfolio selling in the past three days has weighed down the market.
Reliance, which has the highest weightage on the Sensex and Nifty50 indices, has been one of the biggest casualties of the outflow.
Foreigners have pulled Rs 2,500 crore out of Indian stocks in the three days.FIIs (foreign institutional investors) have turned negative in the market for the last few days.
That has weighed on RIL as well, said Abhimanyu Sofat, head of research at IIFL.RIL gained as much as 2 per cent on Friday but lost momentum later to end down 0.4 per cent at Rs 1,250.50.
The market cap of TCS stood at Rs 8.01 lakh crore on Friday while that of RIL was Rs 7.93 lakh crore.Morgan Stanley on Thursday downgraded Reliance to equal-weight, saying that earnings growth is likely to halve in the current financial year after seeing a 17 per cent growth on compounded basis in FY17-19 period.
Earnings are likely to be hit due to lower availability of Venezuelan and Iranian crude and a glut in the polyester and gas markets.Downside earnings surprises in the energy business should unfold and attract increasing investor attention a reversal in narrative after the positive triggers that have played out since 2017, Morgan Stanley said.Analysts have also raised concerns over shale-related writeoffs besides the weak downstream cycle.With its priorities now different and segment ebitda (earnings before interest, taxes, depreciation, and amortisation) negative, Reliance has been retreating from US shale having already written off half of its $9.5 billion spend, said Jefferies on Wednesday.
Indeed, shale would cost Reliance $5 billion in net cashflow too if it could divest residual assets at the $2.3 billion carrying value but Pioneers Eagle Ford sale suggests that this may be too optimistic.Sofat said the difference between Bharti Airtel and RIL telecom arm Reliance Jio Infocomm in terms of mobile revenue growth has narrowed, which is also weighing on the stock.The Mukesh Ambaniled company had reported a 9.8 per cent increase in net profit for the quarter ended March at Rs 10,362 crore.
Gross refining margins narrowed to a 17-quarter low of $8.2 a barrel.TCS, on the other hand, delivered better-than-expected earnings in the fourth quarter and the IT sector is likely to outperform in a weak market, said Sofat.
Shares of TCS have gained 12.8 per cent this year.
To be sure, even after the latest drop, RIL is up 11.5 per cent so far in 2019, and for the last one year, the stock is up 27.5 per cent.Technical analysts believe that the medium-term trend for Reliance Industries remains positive.After a sharp upmove in the previous few months, the stock is seeing profit booking but the intermediate uptrend has not changed.
A fall to (Rs) 1,080-1,100 levels would be a buy-on-dips opportunity, said Nagaraj Shetti, technical research analyst at HDFC Securities.
Sofat of IIFL said the stock would be a good buy at Rs 1,150.