MUMBAI: Share prices of Reliance Industries (RIL) and Reliance Natural Resources (RNRL) have reacted sharply ever since reports of Supreme Court's early verdict on the KG 6 basin gas dispute surfaced. According to marketmen, the apex court may pass judgment in favour of RNRL. The verdict is likely to have some sentimental impact on the stock market, as RIL is an index heavyweight.
Analysts are not expecting a major correction in RIL even if it loses the case whereas RNRL is expected to react sharply.
"If RNRL loses the case then it will only concern the company shareholders or bear a negative sentimental impact on ADAG group shares. But if the verdict is against index-heavyweight Reliance Industries, it can have a negative impact on the market. RIL may correct up to 5 per cent and move sideways for next few sessions," said DD Sharma, senior vice-president, equity, Anand Rathi.
"RNRL will turn volatile and move sharply in either direction once the judgment is out. If it wins the case then it may move 25-30 per cent on the upside. But if it loses the case then it will fall more than 50 per cent," Sharma added.
Siddarth Bhamre, Head – Derivatives & Investment Advisory at Angel Broking, is of the view that traders should avoid trading in futures as volatility in the RNRL stock will increase tremendously. He suggests taking positions ahead of the verdict.
"If RNRL loses the case then there will be fundamental downside for the stock. Speculative traders can buy put options in case they expect the company to lose the case. If they expect RNRL to win the case then buy 70 call option," Bhamre added.
RIL and RNRL have been fighting a legal battle over the supply of 28 million units of gas for the next 17 years at $2.34 per unit to RNRL from the gas fields of Krishna-Godavari basin, which had been awarded to Mukesh Ambani's RIL as part of the New Exploration or Licensing Policy (NELP).
"We note that a decision on the ongoing RIL-RNRL gas case dispute in the apex court is expected soon. We would highlight that our base-case fair value of Rs 1,220 on factors (a) gas sales of 28mmscmd to RNRL at $2.3/mmbtu starting FY13E (b) Profit Petroleum (PP) calculation at $2.3/mmbtu.
Hence, our fair value would be at risk to the tune of Rs 48 (4% of TP) if the PP calculation for the disputed quantity is decided at $4.2/mmbtu. A favourable verdict would imply Rs 35 upside to our fair value," said Ambit Capital in a research note after Reliance Industries reported fourth quarter results. The brokerage has a ‘Buy' rating on the stock with target price of Rs 1220 per share.
In the past one-week, shares of Reliance Industries have fallen around 4 per cent while those of Reliance Natural Resources have galloped around 10 per cent. The shares are witnessing sideways movement ahead of the verdict.
At 11:20 am on NSE, shares of RNRL were up 0.29 per cent at Rs 68.70 whereas Reliance Industries was at Rs 1018.20, down 0.24 per cent.
What are the Ambanis fighting for? | The gas row
RIL-RNRL verdict: 2 derivatives strategies to play the stocks
Src: Economictimes.
Analysts are not expecting a major correction in RIL even if it loses the case whereas RNRL is expected to react sharply.
"If RNRL loses the case then it will only concern the company shareholders or bear a negative sentimental impact on ADAG group shares. But if the verdict is against index-heavyweight Reliance Industries, it can have a negative impact on the market. RIL may correct up to 5 per cent and move sideways for next few sessions," said DD Sharma, senior vice-president, equity, Anand Rathi.
"RNRL will turn volatile and move sharply in either direction once the judgment is out. If it wins the case then it may move 25-30 per cent on the upside. But if it loses the case then it will fall more than 50 per cent," Sharma added.
Siddarth Bhamre, Head – Derivatives & Investment Advisory at Angel Broking, is of the view that traders should avoid trading in futures as volatility in the RNRL stock will increase tremendously. He suggests taking positions ahead of the verdict.
"If RNRL loses the case then there will be fundamental downside for the stock. Speculative traders can buy put options in case they expect the company to lose the case. If they expect RNRL to win the case then buy 70 call option," Bhamre added.
RIL and RNRL have been fighting a legal battle over the supply of 28 million units of gas for the next 17 years at $2.34 per unit to RNRL from the gas fields of Krishna-Godavari basin, which had been awarded to Mukesh Ambani's RIL as part of the New Exploration or Licensing Policy (NELP).
"We note that a decision on the ongoing RIL-RNRL gas case dispute in the apex court is expected soon. We would highlight that our base-case fair value of Rs 1,220 on factors (a) gas sales of 28mmscmd to RNRL at $2.3/mmbtu starting FY13E (b) Profit Petroleum (PP) calculation at $2.3/mmbtu.
Hence, our fair value would be at risk to the tune of Rs 48 (4% of TP) if the PP calculation for the disputed quantity is decided at $4.2/mmbtu. A favourable verdict would imply Rs 35 upside to our fair value," said Ambit Capital in a research note after Reliance Industries reported fourth quarter results. The brokerage has a ‘Buy' rating on the stock with target price of Rs 1220 per share.
In the past one-week, shares of Reliance Industries have fallen around 4 per cent while those of Reliance Natural Resources have galloped around 10 per cent. The shares are witnessing sideways movement ahead of the verdict.
At 11:20 am on NSE, shares of RNRL were up 0.29 per cent at Rs 68.70 whereas Reliance Industries was at Rs 1018.20, down 0.24 per cent.
What are the Ambanis fighting for? | The gas row
RIL-RNRL verdict: 2 derivatives strategies to play the stocks
Src: Economictimes.
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