RIL's double whammy: Knee-jerk reaction may drag market

Money control Bureau

This is a shocker and it is sure to erode a lot of sentiment on Monday. The market enjoyed a good 8% rally in the last three week. However, poor performance of RIL in the October-December quarter may just be a party pooper. Experts feel that it is a double whammy for Reliance as profits fell 22% sequentially and there is no real kicker from the buyback either. The board only approved a Rs 10,400 crore rupee offer at 870 rupees per share.
A very disappointed SP Tulsian of sptulsian.com is not convinced that the buyback can really salvage or can give support to this bad set of numbers and definitely the market is going to take very negative note of it. He is even expecting the stock to tank to Rs 750 per share on Monday.
"I am still maintaining that because forex losses are not given any treatment in the P&L account by the company because of its policy. But suppose the only saving grace could be that some forex losses which is seen just as a adjustment can only save this," Tulsian adds.
Ambareesh Baliga, COO, Way2Wealth, however, does not agree much to Tulsian. He warns that the stock will surely get knee-jerk reactions on Monday morning, but not too much of a downside is seen as buyback may act as a cushion.
He is worried that crossing levels of 5050-5100 is going to be difficult and we could see some amount of profit booking coming in.
There is some soothers too as Baliga does not see to much of a downside for the market. He reasons out. "Whenever we see this correction, I think those who have missed out in the last fortnight would actually come in and start buying." The only positive factor that could pull Reliance up on Nifty is announcements about its acquisition plans, adds Baliga.
According to him, if those announcements come over the next one or two weeks it could trigger the stock because by then the results will be clearly behind us and people will start looking ahead.
The company has posted a net profit of Rs 4440 crore, down 13.6% year-on-year on the back of lower refining and petchem margins. Sales, however, grew 40.2% to Rs 87,480 crore.
While the company's gross refining margins declined to USD6.8 per barrel from USD 9 per barrel and its petchem stood at 10.9% versus 11.5% year-on-year. Nasrin Sultana
Nasrin.sultana@network18online.com