The Hindu Business Line : Brokers feel Sensex may touch new high

The end of the seven-month-old rift between the Ambani brothers over ownership is seen as being positive for the Reliance group companies stocks and the overall stock market, brokers and analysts said on Saturday.

They said the end to the controversy would help the stock market to open firm on Monday and possibly see a new high on the BSE Sensex.

The benchmark index is just 48 points away from an all-time high of 6,954 touched on March 9 this year.

Brokers said Dalal Street was optimistic after the announcement that grey market operations in the Reliance Industries (RIL) stock turned active after a long time, with transactions around Rs 615-616 - a gain of 2.5 per cent from Friday's close.

"The settlement of the Ambani feud is good news to nudge the Sensex past its all-time high of 6,954 touched on March 9," said Mr Arun Kejriwal of KRIS Research.

Mr Ambarish Baliga, Vice-President, Karvy Stock Broking said, "It is good for the shareholders of Reliance Industries. It (RIL) was quoting at a discount to its intrinsic value and this value would be unlocked now." He said other group companies stocks would also follow soon.

Mr Gul Keckchandani, Chief Investment Officer, Sun F&C Mutual Fund, said, "It is a positive development and will help improve the sentiment of the market. Since RIL has high weightage in index, it will push the index."

Foreign broking firm CLSA, in a report issued on Friday on RIL, said, "A combination of the ownership dispute and a lack of transparency related to Reliance's `strategic' investments (especially in Infocomm) had prevented the full value of these investments (30 per cent of balance sheet)."

It said this would get corrected as valuation visibility emerges on both sets of businesses and the holding company/conglomerate discount goes away. "Stronger free cash flow will also translate into better dividends payouts in the core company."

Reliance stocks shine this month

THE Reliance group companies (except Reliance Capital) shares had under-performed on the Nifty and Sensex for the past seven months. But since June, they have outperformed these benchmark indices.

Since November 18, when the rift was first hinted, the RIL stock price gained 10.13 per cent compared to a rise of 14.62 per cent for the BSE Sensex and 12.27 per cent for S&P CNX Nifty.

But from the beginning of this month, the stock gained 13 per cent, while the Sensex is up 2.85 per cent and the Nifty by 1.89 per cent.

Reliance Energy stock declined 5.89 per cent since November 18, but gained 13.93 per cent from June onwards.

The IPCL stock declined by 14.39 per cent since November 18, but remained flat this month.

Reliance Capital is the only stock that has outperformed with a gain of 69 per cent from November.

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