RIL shares drop 5% in 2 sessions: Why the stock fell, expert explains

Shares of Reliance Industries Ltd (RIL) declined 3.41 per cent on Monday to settle at Rs 1,304.75. At this closing level, the stock has fallen 4.70 per cent in two sessions.

Deven Choksey, Managing Director at DRChoksey FinServ Pvt, said the fundamentals for RIL remain in shape. "I don't see anything wrong with the fundamentals. Yes, to a certain extent, you might have a little adversity in the raw material prices and the resulting impact. That is from the oil to chemical business, but you can't generalise it across the board for all the products of Reliance. I don't think that Jio Platforms or the retail segments are facing anything adverse. So from that perspective, the stock remains pretty okay," the market veteran told Business Today.

Choksey added that foreign portfolio investors' (FPIs) reduced holdings also played a role. "I have been studying the data, both in the derivative market and in the cash market. In the last one and a half years, FPI holdings in the cash market have come down by around 2 per cent, which is close to Rs 30,000-40,000 crore worth of market cap if one takes an average price of Rs 1,400 during this period."

"Subsequently, a slight recovery has taken place as Indian mutual funds have bought the stake that FPIs sold to a greater extent. So the stock has remained stable," he said.

Why the stock fell

Highlighting the reason behind the drop, Choksey pointed to derivative markets. "The villain in the pack is the derivative market. If you see the derivative market data for the same period, there has been constant hammering of the stock. Short sellers have probably made maximum gains, largely because their view was that the rupee would fall and the stock price would decline. Those who shorted and recovered made a fantastic killing, but that has actually caused the price damage."

The expert also noted, "The fall in the market seems to be partly due to repayment of collateral that investors may have incurred, or due to the margin requirements -- particularly the cash margin in the derivative market, which came into force in April. This may have led to some part of the proprietary trade getting unwinded."

Choksey concluded, "Nothing fundamentally wrong. Maybe the technical factors of the market have taken a toll on the stock."