RIL snaps 3-day upmove; Kotak downgrades to ‘reduce’

MUMBAI: Oil & gas major Reliance Industries snapped three-day upmove and closed over 3 per cent lower in trade in line with other stocks from the oil & gas sector.

The stock surged over 21 per cent since the beginning of May and profit booking was on expected lines. Other stocks such as ONGC, GAIL, Cairn India and BPCL closed in the red.

Reliance was also under pressure after Kotak Institutional Equities downgraded it to ‘Reduce’ after the sharp rally in the stock and rupee appreciation.

“We downgrade Reliance stock to ‘Reduce’ from ‘Add’ previously post the sharp 38 per cent rally over the past three months. RIL’s standalone EPS will likely be flat through FY2016 and will jump in FY2017 based on a timely start of new projects,” the report said.

“FY2017 is far away and the stock is already discounting our FY2016 SOTP-based TP of Rs 1,085 (Rs 1,035 previously). Low value creation from the large investments in noncore businesses may act as a drag on returns. Sustained INR appreciation is another risk,” the report added.

The brokerage has recommended investors to book profits at these levels given unfavorable risk-reward balance and wait for better entry points in the stock.

The stock ended at Rs 1,080, down 3.58 per cent, on the BSE. It touched a high of Rs 1,129 and a low of Rs 1,075.70 in trade today.

The BSE oil & gas Index closed 3.26 per cent lower against 0.06 per cent rise on the Sensex.