Wednesday, July 08, 2009

RELIANCE IND may be impacted by recent newsflow:-

  • The Supreme Court refused to stay a verdict of the Bombay High Court in the long-standing gas dispute between RIL and RNRL. The apex court has announced July 20 as the last date for responding to the appeals filed by each other. The matter will come up for hearing on the same day. 
Last act of RIL-RNRL gas saga begins
  • Union Budget has raised rate of Minimum Alternate Tax from 10% to 15% and the move can have negative effect on bottomline of RIL. 
Reliance Industries’ tax outgo in 2007-08, as per its cash flow statement for that period, was around Rs2,484 crore. The new proposal will increase the tax outgo by at least Rs1,200 crore, if the book profits are maintained at the current level.
  • This Union Budget inserted a new provision to allow 7-year income tax holiday for gas production from blocks allotted under NELP VIII (launched in April 2009 and to close in August 2009). Now if this applies to gas produced from blocks allotted under NELPI to NELPVII is still uncertain. As RELIANCE has most of the blocks from previous NELP schemes and if the courts in India don't allow for tax holiday on them from here on, it will be a major impact on profits for this company.

Technically speaking:-
The stock of RELIANCE has started showing lower tops and bottoms and now trades in a down channel. The stock may test Rs 1650-1700 levels so one can wait for those levels to invest in this company owing to uncertainty over RNRL-RIL matter, increased Tax outgo because of MAT and dubiousness about the NELP tax holiday; Crude has fallen nearly 15% from its recent peak and that makes things a little worse for the company as GRMs (Gross Refining Margins) may get hit. 200DMA at 1787 and stock staying below that will put extra pressure on it.

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