Reliance Industries’ (RIL) 1:1 bonus failed to have much of an impact on the company’s stock
Reliance Industries’ (RIL) 1:1 bonus failed to have much of an impact on the company’s stock. Though it opened higher, all the euphoria died out by the end of the trading session.
The stock shot up by 5.24 per cent (Rs110) to Rs2209 in the first few minutes of trade as retail investors were excited about getting one free RIL share for every share held.
· But, the stock lost momentum and ended at Rs 2119.20, just 0.96 per cent higher than its previous close of Rs2099.
· Analysts feel the stock failed to sustain its early gains as a significant chunk of RIL shareholders are institutional investors. “The bonus did not create any kind of positive impact on the sentiment of bigger investors.
· Moreover, with uncertainty over the fate of the gas deal with Reliance Natural Gas Ltd, investors rushed to book profits. “The RIL bonus issue was expected to boost market sentiment, but smart investors booked profit after the early trade as they did not want to increase their exposure in the market where the sentiment is currently negative.
· Traded volumes at the RIL counter were, however, significantly higher, at 24.83 lakh — more than thrice the 2-week average of 7.71 lakh.
· Announcement of bonus has not always had a major positive impact on stocks. When IT major Tata Consultancy Services declared a bonus issue in April 2009, the scrip closed lower the next day. It had also shot up in intra-day trade.
· RIL also declared its consolidated results on Wednesday, which were not great. The company’s consolidated net profit for FY09 was at Rs15,296crore versus Rs19,523crore last year.
· Going forward, in near term, margins would be under pressure on account of declining refining margins and prevailing low petrochem prices globally. Also, the company’s other business of gas faces uncertainty. “There is still huge uncertainty till the Supreme Court judgement comes out in the RIL-RNRL gas dispute. In case RIL loses, future earnings would go down to an extent, leading to softening in stock price.
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