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The Reliance Industries stock dipped by around three per cent on the stock exchanges on Thursday on fresh concerns that gas output from Reliance's KG-D6 block may dip further.
This was on a day when the broader Sensex slipped by 0.27 per cent to end the day at 18,153.99.
After a weak opening, the heavyweight stock settled 2.86 per cent lower at Rs 812.15 on the BSE. On the NSE, the stock closed at Rs 811, down 3.07 per cent from its previous close.
RIL had recently submitted the sale profile for natural gas to be produced from KG-D6 block for 2012-13 and 2013-14 to the Directorate General of Hydrocarbons (DGH) and the Oil Ministry.
Concerns were raised that production from the basin was likely to dip to an all-time low of about 22 million cubic meters a day by 2013-14.
Several brokerage houses downgraded the rating for RIL's stock.
An HSBC report downgraded RIL to ‘underweight' while dubbing the buyback as the only support.
“In view of the recent stock run-up, we downgrade RIL to an underweight but keep our target price unchanged at Rs 800,” added the report.
A report by Emkay also voiced concerns over falling production from KG-D6 basin against earlier expectations. “Share buyback to act as a support, however stock to underperform until any positive news emerges from company's work over efforts.” It said that the expected drop in volumes would affect the company's earnings for the next two fiscal years.
Emkay also downgraded the stock to ‘hold' from ‘accumulate' and cut its target price to Rs 879.
Moreover, some analysts said that the upcoming expiry of long positions taken by people after the Reliance buyback announcement was also contributing to selling pressure in RIL stock.
“After the announcement of the buyback offer by Reliance, people had taken long positions in futures and options due for expiry next week. So there was a rolling out from February to March series to shift their positions, creating selling pressure in the stock,” said Mr Alex Mathews, Head of Research at Geojit BNP Paribas Financial Services.
“The concerns of falling gas output from KG-D6 basin have been long known to everyone but we are seeing the technical correction now. But this also offers a good opportunity for investors to buy the stock at attractive prices if it falls further below Rs 800,” he added.
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