Use the latest fall to buy Reliance: Pankaj Murarka

Synopsis “While refining companies were enjoying super normal gross refining margins, the stock had responded but not completely priced in the super normal gross refining margins. It was expected that at some point of time, there is always a risk that the government might want to take some part of that super normal profits on them to fund the local fuel subsidy. ” ETMarkets.

com Related Has the derating started in Reliance stock? Sushil Choksey answers Fall on imposition of fuel export duty can be a good point to enter Reliance: Deven Choksey Hold cash or else invest in these 3 sectors: Sandip Sabharwal “Despite this tax, I still think Reliance ’s refining margins and profitability on the refining and the oil business will be significantly higher than what we witnessed last year,” Pankaj Murarka , CIO, Renaissance Investment Managers. Which camp are you in? Is there a knee jerk or excessive reaction in the market to the government imposing export duty on fuel? Is it a good entry opportunity or is the correction justified? We need to look into the context of the kind of challenge we are facing as an economy, given our energy intensity. These are extraordinary times in the world and given our energy dependence and intensity, the government has to respond because we are talking about incremental fuel below $60 billion and effectively it makes imminent sense from a policy makers point of view to share that burden across all the stakeholders – be it the government, companies – whether they are state owned or private sector refiners and the consumers, because it is an significant amount and everyone has to bear that burden.

To some extent, this was anticipated and which is why even before this announcement, while refining companies were enjoying super normal gross refining margins, the stock had responded but not completely priced in the super normal gross refining margins. It was expected that at some point of time, there is always a risk that the government might want to take some part of that super normal profits on them to fund the local fuel subsidy or the bills or to lighten the burden on the consumer. Stock Analysis – Know before investing Stock score of Reliance Industries Ltd moved down by 1 in a week on a 10-point scale.

Subscribe Now Exclusively for Stock Analysis Stock score of Reliance Industries Ltd is 9 on a scale of 10. View Stock Analysis » I am not completely surprised by this and having said that, at least in the case of Reliance, this is definite an opportunity to buy into because the energy business or the oil business is just about 40% of Reliance overall valuation. The other two businesses – telecom and retail – are immune to this and they are firing on all fronts.

Despite this tax, I still think Reliance’s refining margins and profitability on the refining and the oil business will be significantly higher than what we witnessed last year. At least from the Reliance point of view, this is a kneejerk reaction. Right now it is happening in the world and other governments are also doing the same thing.

I just feel that it is not like a complete letdown. The shutter is going to open because India has done a policy change and some foreigners will want to come and sell. Do you agree with me? Absolutely, I completely agree with you.

China is a very extreme case in terms of the way they go about regulations and there always has been uncertainties in China. But that was not the case in India because our markets are fairly independent and when it comes to policy making, a more important thing is consistency and clarity. MORE STORIES FOR YOU ✕ Has the derating started in Reliance stock? Sushil Choksey answers Fall on imposition of fuel export duty can be a good point to enter Reliance: Deven Choksey Hold cash or else invest in these 3 sectors: Sandip Sabharwal « Back to recommendation stories I don’t want to see these stories because They are not relevant to me They disrupt the reading flow Others SUBMIT At the same time.

this is one of those extraordinary times where oil prices have had a meteoric rise in the last five or six months because of the war and other global geopolitical situations. The best way which the government is trying to approach this is through a middle path, where it is essentially saying that the burden of this whole high oil prices has to be shared between all stakeholders because the amount is pretty significant at about $60 billion odd and no single stakeholder can completely bear this burden. From a policymakers’ perspective, it is absolutely fair to say that it should be shared between all stakeholders and I do not find anything unusual or I do not think foreign investors or for that matter any investor would have any issues around that.

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