Bolstered by strong refining margins, firm regains top position in Sensex

Reliance Industries stock surged as marketmen bet on Tuesday’s crucial management committee meeting. The committee oversees operations of Reliance Industries’ KG-D6 block. With over a billion dollars at stake, the committee will consider and adopt the block’s audited accounts pending for the last three years.

Besides, rising gross refinery margins (GRMs) boosted the Reliance Industries stock to Rs 785.30, up 42.40 points or 5.71 per cent from its previous close on the BSE. It closed at Rs 783.50, up 40.95 points or 5.51 per cent from its previous close on the NSE.

Total traded quantity of the scrip also rose to 14.52 lakh against its two-week average of 2.76 lakh shares on the BSE. The scrip’s 52-week high stood at Rs 902 a share and the 52-week low at Rs 671 per share.

The strong show catapulted Reliance Industries stock back into the top position as the highest-weighted stock on the BSE Sensex on Monday. The stock ended the day with a 9.59 per cent weightage in the Sensex, beating ITC to the top spot. The FMCG major came a close second with 9.58 per cent. However, on the NSE Nifty, ITC is still the number one with 8.46 per cent weightage.

Commenting on the stock movement, Mr Bhavesh Chauhan of Angel Broking said: “Investors would be tuned into the outcome of the meeting of Directororate General of Hydrocarbons scheduled for Tuesday to see whether RIL manages to get the relevant approvals for its capex plans. It could have an immediate impact on the scrip but for the long-term we remain neutral on the stock.”

Boosted by RIL, both the Sensex and the Nifty closed 1.25 per cent and 1.28 per cent higher than their previous close.

Singapore GRM rose to an average of $8 a barrel from $6.7 a barrel in the quarter ended June 30 2012.

“Reliance’s stock factors in continuity of status quo — refining/chemicals remaining at cyclical bottom, absence of approvals upstream, sustained losses in retail and adverse gas prices for shale gas in US,” said Niraj Mansingka of Edelweiss in a latest report.

According to him, the worst case scenario for Reliance stock is “Rs 707” only.

“Refining margins were improving in July as oil demand rose in Asia, along with closures in US/Europe and new project delays. We believe the market is over-estimating capacity additions and recovery in industrial activity could lead to positive margin surprise,’’ said Goldman Sachs.

Reliance Industries reported a net profit of Rs 4,470 crore for the June quarter (up 5.6 per cent q-o-q, but down 21 per cent y-o-y), primarily on a higher refining margin of $7.60/bbl.

(This article was published on August 6, 2012)
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