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Our Bureau

Mumbai, Nov. 5 Heavy profit booking coupled with some negative news led to a sharp fall in the stock of index heavyweight Reliance Industries, which led the 4.8 per cent fall of the Sensex on Wednesday.

The stock fell by 12.9 per cent.

Profit booking was inevitable given how steeply the stock rose over the last six trading sessions in the bear-led rally, said brokers.

From its intra-day low of Rs 930 on October 27, the stock rose to Rs 1,455 at yesterday’s close, gaining 56 per cent in just five trading sessions.

Other reasons for which the stock was hammered included a downgrade of the stock by a foreign broking firm, coupled with the fact that the stock fell below the key support level intra-day of Rs 1,432, said Mr Alex Matthew, Head of Research, Geojit Financial Services.

The stock witnessed a high of Rs 1,500, and touched a low of Rs 1,244 before closing at Rs 1,269.45.

To add to this were reports that the company had shut down five of its plants and would shift some others from their existing locations, said analysts.

Later in the day, the company issued a statement to say there were no plans currently to shift any of its plants from Patalganga to Nagothane.

“The PTA and LAB facilities are currently operating at full capacity in Patalganga. Some of the polyester plants are shut for routine maintenance and enhancing product capabilities. We expect to restart from this month,” a company statement to the exchanges said.

The Patalganga site had announced a voluntary retirement scheme on October 5, 2008 as part of its normal cost optimisation exercise and over 400 people had opted for the same, the news release said.

However the fact that the company is downsizing, for whatever reason, would add to the negative sentiment, said brokers.

Reliance fell on the back of falling petrochemical prices over the past month, said Mr Sonthalia.

Reliance had not quite participated in the rally yesterday only going up towards the fag end of the day, said an analyst. That already indicated signs of weakening, he added.

Another reason for the Reliance stock to fall was the fresh short positions initiated by traders.

The Reliance future closed at 1257, sharply in discount against the spot close of 1269.05. According to brokers, this indicates accumulation of fresh short positions.

The Reliance future added about 9.75 lakh shares or 17 per cent in open interest positions. The un-matched bid/ask order book on the NSE also pointing towards accumulation of short positions.

More Stories on : Stocks | Reliance Industries Ltd | Petroleum

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