What should RPL investors do?

Following the steep fall in the share price of Reliance Petroleum, what should retail investors do? The surge in the stock last month had many retail investors flocking to the counter, even as experts were crying hoarse that the shares were overvalued. After touching a peak of Rs 295 earlier this month, the stock price has been hurtling downhill.
The stock is yet to emerge out of the trading ban in the derivatives segment — it had done so for brief while on Monday — players expect some more volatility at the counter.

Investors should continue to tread cautiously, warn market watchers. “The current confusion regarding the stock’s movement would get cleared by the expiry of derivatives on Thursday and by then RPL is expected to come out of F&O curb,” said PINC Research head-derivatives and strategy Sailav Kaji.

“What is needed to be looked at is whether in the derivatives expiry short positions are rolled over or get covered. In case of short positions getting rolled over, the stock will find support at Rs 180,” he said, adding that long-term investors can still buy the stock at current levels.

Sentiment has been undermined by the promoter, Reliance Industries’, decision to offload 4% stake in Reliance Petroleum through open market trades.

Market watchers said the next key trigger for the stock will be Chevron’s decision on its 5% stake in Reliance Petroleum. Chevron has an option to raise its stake to 29%, but analysts see a low possibility of that happening following RIL’s decision to sell shares in the open market.

”We believe that RPL’s rich valuation and the fact that RIL sold a 4% stake to the market, may imply a possible future Chevron exit unless there is meaningful pullback in the market,” broking house Goldman Sachs said in a note to clients.

Many analysts expect RPL to stabilise around Rs 180 near term. However, Religare Securities president-equities Amitabh Chakraborty said the stock could rally to Rs 215-220 by the end of the December derivative series.“Investors who are right now long on RPL futures should roll over their positions to the December series,”
he said.

The 29-million-tonne-per-annum refinery being built by Reliance Petroleum was originally scheduled to commission by December 2008. However, considering the fact that almost 70% overall progress has already been achieved, the management expects to complete the project ahead of schedule. By crunching the original timeline of three years, the company is poised to create a new world record for project implementation in the refining sector.

Via ET