Shares of Reliance Industries Ltd (RIL), India’s most valuable stock, fell nearly 3% on Monday morning, hitting a fresh 52-week low of Rs 1,163.70, as foreign institutional investors (FIIs) continued their relentless selling of Indian equities.
The slump in Reliance’s stock price mirrors a broader decline in the Indian stock market. The weakness has been attributed to global economic uncertainties and significant FII outflows. Overseas investors have been exiting Indian markets, fueled by concerns about the Reserve Bank of India’s recent interest rate hikes to combat inflation, rising tensions between India and China over border disputes, and the strengthening US dollar, which has led to reduced demand for emerging market equities.
As a conglomerate with a presence in the oil-to-telecom, retail, and digital services sectors, Reliance has recently experienced heightened volatility in its stock performance. Analysts believe heavy FII selling and apprehensions about global economic slowdowns potentially affecting corporate earnings have contributed to the stock’s decline. According to financial analyst Rajiv Kumar, ‘The recent FII outflows have surpassed $1 billion monthly, signaling reduced confidence due to looming global recession fears.’ Additionally, data from Bloomberg revealed a 3% dip in Reliance’s stock price in the past month, underscoring the impact of these factors.
Over the past six months, RIL’s shares have plummeted by 23%, marking a 28% drop from its record high of Rs 1,608.95. This downturn reflects broader pressure on blue-chip stocks as FIIs continue to sell their holdings in Indian equities. Comparatively, the BSE Sensex, a benchmark index, has declined by approximately 10% during the same period, highlighting the sharper fall in RIL’s shares. This has led to a noticeable decline in the company’s market valuation as part of the larger sell-off.
Looking forward, investors are expected to closely monitor global economic trends, domestic policy changes, and company earnings reports to ascertain Reliance’s stock trajectory. Factors such as interest rate adjustments, inflation rates, and government reforms, especially in sectors like energy and telecommunications, could significantly influence RIL’s stock performance in the short term. Additionally, market stability, particularly in FII flows and other macroeconomic indicators such as GDP growth and currency fluctuations, is seen as pivotal for any potential recovery in Reliance’s share performance in the coming weeks.
Adding to the challenges, Bloomberg reported that Reliance New Energy Ltd (RNEL), a subsidiary of RIL, is facing potential penalties of over $14 million. The penalties are related to delays in setting up a battery cell manufacturing plant, a key part of Prime Minister Narendra Modi’s Production-Linked Incentive (PLI) scheme aimed at reducing import dependence.
RNEL was among the firms awarded a bid in 2022 to develop battery cell manufacturing under the government’s initiative, which pledged subsidies worth Rs 18,100 crore to promote local production. Manufacturers are expected to meet milestones for creating a 30-gigawatt-hour advanced chemistry cell battery storage capacity, and the risk of penalties highlights the challenges in achieving these ambitious targets.
