Reliance Industries shares set to close the year: Reliance Industries faces first negative annual return in a decade. Explore reasons and future outlook.
Mukesh Ambani-led Reliance Industries (RIL), often seen as a bellwether for the Indian stock market, and a heavyweight on the Benchmark Indices, has hit a rough patch in recent months and the stock is most likely going to end 2024 with negative returns for the first time in 10 years.
One of India’s largest private sector companies, Reliance Industries’ stock over the last three months has significantly underperformed.
Reliance Industries shares – 2024 report card
Let’s take a look at its stock performance, challenges and what is impacting Reliance Industries across its business verticals:
In the past three months, Reliance Industries with an 8 per cent weight in the Nifty 50 has seen its stock tumble by 15 per cent, dragging the index down by 4.9 per cent.
Over the last five days, the company’s stock declined by Rs 17.85 or 1.39 per cent so far. Analysing the six-month performance, the stock saw a sharper fall of Rs 210.33 or 14.20 per cent as of December 16.
As 2024 inches close, the stock performance of Reliance Industries in the earlier period of the year posted a 10.34 per cent gain in January and a 9.44 per cent rise in June. Although, the company’s stock reported notable gains in the earlier months but lost momentum post-August.
In September, Reliance Industries stock tumbled 2.2 per cent, followed by 9.8 per cent in October, 3 per cent in November, and 3.9 per cent in December, wiping out the earlier gains of the company. This led the company’s stock to fall by 2.3 per cent so far, marking the first negative annual return since 2014.
The market capitalisation of the company as of now stands at Rs 17.22 lakh crore. Reliance Industries 52-week high and low are Rs 1,608.80 and Rs 1,203.15, respectively.
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The AGM disappointment
It is also interesting to note that much of the underperformance in the stock prices of the company began after Reliance’s Annual General Meeting (AGM) in August 2024. During its key announcements, the company failed to provide clarity on the monetisation timelines for Reliance Retail and Jio, leaving many investors disappointed.
To pacify shareholders, the company announced a surprise 1:1 bonus issue during the AGM but failed to stabilise the stock price or the other way wasn’t enough to halt the slide.
Why has Reliance been struggling?
Some of the potential challenges or factors responsible for this downturn include margin pressure faced in Reliance’s oil and gas, and petrochemical segments due to global headwinds and fluctuating crude oil prices.
The company also faces some challenges in the telecom segment as the average revenue per user (ARPU) is growing slower than expected. Moreover, Reliance Retail sector is also undergoing restructuring and consolidation, delaying shareholder value unlocking.
Adding to it, some other factors that might be possible responsible for thOver the years, Reliance has invested heavily in its new energy business and other ventures, but operationalisation is behind schedule. Meanwhile, cash flows from these projects have underperformed, forcing the company to rely on additional debt.
Reliance bounce back?
If seen historically, Reliance Industries stocks had robust returns following a similar downturn. Since its listing on the Indian bourses on November 29, 1995, the company’s all-time stock performance surged significantly, reaching Rs 1,244.99 so far, marking a remarkable gain of 4,695.17 per cent.
On a similar note, over the past 5 years, the stock has risen by 60.53 per cent, gaining Rs 479.46 to reach Rs 1,274.45.
Despite its struggles, Reliance remains a critical player in the Indian market. A reversal of the recent three-month loss could add over 340 points to the Nifty 50 index. However, much will depend on how the company addresses its current challenges.
