Barely days before India’s most high-profile, high-stakes case that will decide at what price Mukesh Ambani’s Reliance Industries Ltd (RIL) will sell gas to Anil Ambani’s Reliance Natural Resource Ltd (RNRL), Dalal Street is reading — and sending — stock signals.
RNRL that had jumped 16 per cent between April 26 and May 3 amid huge volatility fell sharply on Tuesday by 7.6 per cent to close at Rs 67. In the same period, RIL saw its share prices fall by 4.2 per cent but held its ground on Tuesday, falling by just 0.3 per cent to Rs 1,021, against the Sensex fall of 1.4 per cent.
“There is no doubt that speculators are playing around,” said the head of a leading brokerage on condition of anonymity.
“RIL is too heavy (large market capitalisation) for traders to move and hence they are playing on RNRL before the judgement. Nobody knows what the judgement would be and logically it should move only on the fundamentals.”
Money managers agree.
“Speculators are betting on RNRL as gas pricing is the single big factor for the company and if the decision comes in their favour, its share price will move sharply and deliver huge gains,” said the head of foreign institutional investor on condition of anonymity. “This is not possible with RIL as one needs muscle power to move RIL shares.”
The market could be overreacting.
“What will RNRL do even if it gets the gas at lower price as it can’t sell it in the market but can use it only for its consumption in which case it does not have a gas-based plant,’ the brokerage official said.
In pure financial terms, the judgement will decide whether the price of gas that RIL sells to RNRL would be $4.20 (Rs 188) per unit as Mukesh wants or Rs 2.34 (Rs 105) per unit as Anil wants.