Reliance Power stock crashes to 5% lower circuit, still in overbought zone

Reliance Power stock has rallied 172 percent in the last one year, more than doubling investors' money. In comparison, Nifty's gained around 28 percent during this period.

Shares of Reliance Power continued their decline on October 7, hitting the 5 percent lower circuit for the third consecutive session as investors engaged in profit-booking. The stock is now trading 11 percent below its 52-week high of Rs 53.64, which it reached last week.

The stock has surged over 60 percent in the past month, fueled by strong investor sentiment after the Anil Ambani-led company announced it had become debt-free. After this stellar run, investors rushed to book profits amid a broader market sell-off.

Recently on September 18, sentiments around the stock strengthened after Reliance Power informed that it has been released and discharged of its corporate guarantee, undertakings and all obligations and claims in relation to the outstanding debt of subsidiary Vidarbha Industries Power Limited (VIPL), amounting to Rs 3,872.04 crore.

The company said it settled all disputes with CFM Asset Reconstruction Private Limited (CFM), as 100 per cent shares of VIPL have been pledged in favour of CFM against the release and discharge of corporate guarantee given by Reliance Power.

Before that, the company secured a major Battery Storage Contract of 500 MW/1000 MWh from the Solar Energy Corporation of India (SECI). The contract positions Reliance Power as a key player in one of the world’s largest standalone battery energy storage projects.

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Technically, Reliance Power shares are trading higher than the 5-day, 50-day, 100-day, and 200-day moving averages (DMA). Its relative strength index (RSI) stands at 79, signalling that the stock is trading in the overbought zone.

According to Abhijeet Ramachandran, a SEBI registered independent research analyst, Reliance Power's stock price is overbought and also bearish on the daily charts with strong resistance at Rs 53.4. "Investors should book profits at current levels as a daily close below support of Rs 48 could lead to Rs 35 in the near term," he said.

At 1:22 pm, shares of Reliance Power were locked at 5 percent lower circuit, trading at Rs 48.40 on NSE. The stock has risen around 102 percent so far this year, outperforming benchmark Nifty's returns of 15 percent.

In the past 12 months, the counter has rallied 172 percent, more than doubling investors' money. In comparison, Nifty's gained around 28 percent during this period.

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