HSBC downgrades SBI, Reliance to 'underweight'

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HSBC downgrades SBI, Reliance to 'underweight'

HSBC downgrades Reliance Industries to 'underweight' from 'neutral' in view of the recent stock run-up in response to its buyback announcement.

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HSBC downgrades Reliance Industries to 'underweight' from 'neutral' in view of the recent stock run-up in response to its buyback announcement.

Reliance's existing upstream(exploration) and downstream (refinery) businesses are under pressure owing to falling gas production and a decrease in downstream margins and the trend is expected to continue in near term, HSBC said in a note.

Gas production for Reliance is expected to fall further for at least another year in absence of any maintenance/workover, the report said. The bank maintains target price for Reliance at Rs 800.

HSBC has also downgraded State Bank of India to "underweight" from "neutral" on worries about the state-run lender's high growth in riskier segments such as small and medium enterprises and agriculture.

HSBC noted that the bank trades at 30% premium to its book value over its peers, although there has been little improvement in the outlook and concerns on asset quality still loomed. It maintained the target price for SBI at 2,000 rupees.

At 1.31 p.m., the stock was up 2% at Rs 2,246.1 in a strong Mumbai market.