On February 12, then Delhi chief minister Arvind Kejriwal had ordered an investigation into the pricing of gas produced from the D-6 block off the Eastern Coast which is operated by Reliance. Reliance has long maintained that geological complexities have pushed production lower.
The Centre in December cleared a price hike starting April 1 which is expected to result in prices that are double the current level. Mr Kejriwal has asked the Prime Minister to suspend that price hike till the issue is resolved.
The gas business does not contribute very significantly to RIL's revenues (for the December quarter RIL's oil and gas business contributed Rs. 1,733 crore in sales, which is just 1.6 per cent of company's overall sales during the quarter).
Reliance Industries has been moving in a narrow range for the last 8-10 trading sessions and selling pressure is likely to persist in the counter. RIL shares may slide to Rs. 787-770 and it is not advisable to go long in the stock.
Local operators will take advantage of the situation and even foreign investors seem to by exiting the stock in favour of state-run ONGC and Vedanta-owned Cairn India.ONGC gained 2.8 per cent to end at Rs. 291.35, while Cairn India ended 0.2 per cent higher at Rs. 324.20.
Currently, Reliance Industries is the third most influential stock on the Nifty (weightage at 7.12 per cent), so consistent under performance in the stock does not augur well for overall markets.
Reliance Industries shares closed down 1.4 per cent at Rs. 799.25 on Friday