On the upcoming Monday, all eyes will be on Reliance Industries Limited (RIL) as it recently announced its Q1 results for 2023 after the Indian stock market closed last Friday. As a company listed not only on Dalal Street but also on the London Stock Exchange (LSE), RIL has seen its Global Depository Receipts (GDR) prices fall around 6% to $62.70 after an intraday low of $62.20. This was the result of the post-announcement fallout of Reliance’s Q1 results, demonstrating a downward trajectory for the company’s share value.
Date: July 22, 2023
Place: New Delhi, India
Market analysts are viewing this significant decline in Reliance GDR prices as a concerning signal for the company’s shares listed in India. A possible massive sell-off of RIL shares might occur when the Indian stock market resumes operations on Monday following the weekend close. The fact that RIL announced Q1 results without surprising factors, along with a 10% decrease in net profits, might exert additional pressure on this heavyweight stock in the Sensex index.
RIL’s shares were already under strain due to an overbought scenario caused by retail investors rushing to purchase shares to obtain Jio Financial Services Ltd (JFSL) shares as benefits following the JFSL demerger. This pressure combined with the GDR price plunge at the LSE may result in a sell-off akin to what happened with Infosys shares on the next Indian trading day.
Avinash Gorakshkar, Head of Research at Profitmart Securities, anticipates a similar sell-off, “Given the announcement of RIL’s Q1 results after the Indian stock market’s closure and the corresponding crash of Reliance GDR share price by 6% at LSE, profit-booking in Reliance shares is widely expected.”
Anuj Gupta, Vice President of Research at IIFL Securities, echoed these sentiments, predicting a weak opening for Reliance shares on Monday. He said, “The 10% decline in net profit announced by Reliance is below market expectations, which along with the GDR price drop after Q1 results, might cause an Infosys-like sell-off during early morning deals on Dalal Street.”
In the Q1 2023 results, RIL reported a 10.8% fall in net profit to ₹16,011 crore while revenue from operations dropped 4.69% to ₹2,31,132 crore. Its Oil-to-Chemicals (O2C) arm saw a 17.7% revenue decrease to ₹1,33,031 crore due to significant cuts in global crude oil prices. Although resilience in the retail and telecom arms, Reliance Retail and Reliance Jio, reported overall growth, it was not enough to offset the weakness in the O2C sector.
The precedence of Infosys ADR price on NYSE dipping over 8% after weak Q1 results, which led to a significant sell-off in Indian IT stocks including Infosys shares, suggests that Reliance may face a similar fate when the Indian market resumes on Monday.
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Sources- Mint, Money Control, Economic Times India
