Reliance Industries Shares Plummet: What’s Behind the $15-Billion Market Cap Loss?
Reliance Industries Ltd. is off to a bruising start to the year, with shares down more than 6% as investors digest weak retail outlooks and tougher US rhetoric on India’s Russian oil purchases — putting the onus on upcoming earnings to arrest the slide.
The selloff so far this year has wiped about $15 billion off the company’s market value, making it one of the stock’s worst starts to a year in recent memory and weighing on India’s benchmark equity gauges. Reliance will report quarterly earnings after close of trading on Jan. 16.
Pressure on the Stock Intensifies
Pressure on the stock intensified this week after several of India’s largest retailers flagged weaker-than-expected consumer demand, stoking concern that Reliance — a major player in the segment — could face a similar slowdown. Sentiment worsened after US Senator Lindsey Graham proposed legislation targeting countries that buy Russian oil, pushing the shares’ weekly decline past 7%, the steepest in more than 15 months.
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Weakening Consumer Demand and US Rhetoric
The weakness follows an almost 30% rally in Reliance shares last year, fueled by expectations that the oil-to-telecom conglomerate was preparing to list Jio Platforms Ltd. in what could be India’s biggest initial public offering. Growing concern over tougher US action on Russia has since cooled investor appetite for the company, which in recent quarters has benefited from refining discounted Russian crude.
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Analysts’ Expectations
Goldman Sachs Group Inc. analysts expect the company’s retail business to report slower growth for the quarter through December on lower discretionary spending but the same would be offset by a strong growth in energy business.
The recent selloff in shares was “potentially due to concerns around refining exposure to Russian crude and softer retail growth momentum across peers,” analysts including Nikhil Bhandari wrote in a note dated Jan. 9. Notwithstanding a moderation in Russian crude volumes, they see the company’s refining margins getting support from tight product markets through next year.
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Buy Recommendation and Upside Potential
The stock still carries a buy recommendation from 35 analysts — the most among global oil & gas firms with market values above $100 billion. Even after the recent selloff, shares have about 16% upside over the next 12 months based on consensus target price, according to data compiled by Bloomberg.
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Conclusion
In conclusion, the recent decline in Reliance Industries’ shares is a significant event in the Indian stock market, influenced by a combination of factors including weak retail outlooks and US rhetoric on Russian oil purchases. As the company prepares to report its quarterly earnings, investors are eagerly awaiting the results to determine the future trajectory of the stock.
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