JPMorgan downgrades RIL rating to 'Neutral', raises target price to Rs 1,100

MUMBAI: JPMorgan has downgraded its rating on Reliance Industries (RIL) to 'Neutral' on the ground that the current share price factors in the positive catalyst that had led to the previous upgrade. The foreign brokerage, however, raised its price target for RIL to Rs 1,100 by March 2015 from Rs 1,000.

"We do not foresee a material change in earnings trajectory," said JP Morgan's analysts Samuel Lee and Neil Gupte.

"We believe GRMs (gross refining margins) are likely to be slightly better but they will be offset by weaker petchems margins, with earnings driven by capacity growth," they said in a note to clients dated June 4.

On Wednesday, RIL shares droppedRs 17.15 or 1.6% to close at Rs 1,078.25. The share has gained 33% since mid-February, when the broader stock market rally before the elections began.

The BSE Sensex has gained 21% in this period.

"We believe that for RIL's share price to re-rate further after the recent rally, the market needs to be surprised by a bigger-than-expected gas price rise (the current reference is $8.4/mmbtu) and/or a significant jump in quarterly D6 production which is not in our forecast," said Lee and Gupte.