RIL can go up 5-10% in short-term: AnandRathi

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RIL can go up 5-10% in short-term: AnandRathi

Ratnesh Kumar of Anand Rathi said that RIL bonus issues news would be good for the market's sentiment. However, he added that bonus issues do not change anything fundamentally for the valuations. RIL’s valuations, Kumar said, could go up 5-10% maximum from the current levels.

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Excerpts from Bazaar on CNBC-TV18 Watch the full show » RELATED NEWS RIL board approves 1:1 bonus issue ALSO READ See what other experts are saying about markets See what FIIs are saying about the markets See what Udayan Mukherjee is saying about the markets Nifty BSE | NSE 29/05/12 Are Mutual Funds betting on Nifty? Other Stocks in this news Reliance Petroleum | Larsen and Toubro |

Ratnesh Kumar of AnandRathi said that Reliance Industries (RIL) bonus issues news would be good for the market's sentiment. However, he added that bonus issues do not change anything fundamentally for the valuations. "The initial reaction will definitely be positive on the stock today. But what you might find is that people would focus on the other issues as well, which might lead to resistance later."

RIL's valuations, Kumar said, could go up 5-10% maximum from the current levels.

Q: The first question has to be Reliance today - how will the market take it and how materially do you think it changes life for the Reliance stock if at all?

A: It is definitely good for the sentiment and wherever it does any tax savings like for retail but otherwise bonus issues do not change anything fundamentally for the valuations etc. So I think the initial reaction will definitely be positive on the stock today. But what you might find is that people would focus on the other issues like what is happening on the refining margins and some of the other litigation issues which are there. So it would face some resistance because of those two factors but initial reaction would definitely be positive.

Q: How are you feeling about the valuations for Reliance and what kind of price do you think it can support stripped of this bonus issue?

A: You will see the company reporting positive earnings growth in this quarter but that will largely be because of D6 as well as RPL consolidation versus the previous year otherwise in the core refining business seeing a downward trend in refining margins. So I think at around these levels - 5-10% higher is probably where maximum I could see the stock in the short-term.    

Q: What about earnings season - how do you think that's going to go by for us?

A: It will definitely be a far better earnings season than the June quarter. But at the same time this is not the quarter in which you are going to have a meaningful positive number for earnings overall for the market. We are looking at - for the market as a whole - flattish kind of earnings number versus the previous year same quarter. You have indeed gotten some decent amount of upgrades. So versus 5% minus growth, which was being expected for FY10 say just about 2-3 months back, right now that number has come up to 5-6%.

I would think that those upgrades will go further on and probably for the year we will settle down at around 10% levels a month or two down the road. Basically the October earnings season will help in those upgrades but at the same time I think the focus is largely on FY11 - how much growth can be there? Right now we are expecting 17-18% growth in FY11 and that is what I would continue to focus on.

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