RIL fall post Sebi order is merely a knee-jerk reaction: Analysts

Sebi has also barred Reliance Petroleum from F&O segment for a year

Reliance Industries (RIL) lost nearly 2.7%, or Rs 35, on the National Stock Exchange (NSE) by late noon deals after the market regulator the Securities and Exchange Board of India (Sebi) on Friday directed the company to disgorge Rs 447.27 crore, made “unlawfully” by dealing in shares of its erstwhile subsidiary, Reliance Petroleum (RPL). By comparison, the NIfty50 index was trading 0.5% lower at 9,060 levels.

The markets regulator has also barred the Mukesh Ambani – controlled company from the futures and options (F&O) segment for a year and asked it to settle all existing open positions. RIL will also have to pay 12% interest on the disgorgement amount since November 29, 2007.

In a media release, RIL clarified its stand and said that Sebi appears to have misconstrued the true nature of the transactions and imposed unjustifiable sanctions.

Analysts say that the fall in the stock on Monday was a knee-jerk reaction to the development. Given the run-up seen over the past few months, investors are using the news development to book profit in the counter.

“The fall in the stock is in-line with the overall market weakness. The stock is pricing in the negative news at the current levels,” says G. Chokkalingam, founder & managing director of Equinomics Research & Advisory.

Also Read: Sebi passes Rs 447-cr disgorgement order against Reliance Industries

Since December 26, 2016 when the markets hit their recent low, RIL has gained around 21% to Rs 1286 levels on Friday, as compared to around 14% rise in the Nifty50 index.

“Sentimentally, the news is a negative for the stock. There can be some profit booking in the counter, but the overall trend remains positive. I don't see this development as a catalyst that can trigger a huge correction in the stock. The fall seen on Monday is merely profit booking by traders. The stock has support at Rs 1,240 levels and faces resistance at Rs 1,280 and Rs 1,313 levels, technical charts suggest. The medium-term trend remains positive,” said Chandan Taparia, derivatives and technical analyst at Motilal Oswal Securities.

Recently, global brokerage and research house CLSA had raised the target price on Reliance Industries’ stock to Rs 1,500 from Rs 1,350. It maintained its ‘buy’ rating on the stock, citing optimistic commentary by the company management on its telecom venture Reliance Jio, while also raising the valuation multiple on the refining business.