Is Reliance Cheating?

As it is investors are fed with the way Reliance industries stock has kept sleeping for past 2 years and has given negative returns as compared to Sensex and Nifty.

So, factually if we see the action in the stock price we find that something hunky dory has been going in the Reliance stock and Kejriwal missile has definitely targeted the correct person as stock price never shows a wrong picture.

Arvind Kejriwal has alleged that Reliance Industries Ltd has benefited as it did not produce adequate gas from the eastern offshore Krishna Godavari (KG) basin block so as to put pressure on the government to hike the price. It is surprising that Oil Ministry has decided to hike the natural gas price to $8 per million British thermal unit as against current $4.2 from April 1.

It is pertinent to note that Krishna Godavari (KG) Basin is spread across 50,000 sq km in the Krishna River and Godavari river basins near the coast of Andhra Pradesh. The site Dhirubhai-6 (D6) is where Reliance Industries discovered the biggest gas reserves in India. In government records, the 7,645 sq km block is known as KG-DWN-98/1. The KG basin is considered to be the largest natural gas basin in India.

Government of India opened up hydrocarbon exploration and production (E&P) in the country to private and foreign players in 1991. Small and medium sized blocks were opened up in this round which was followed up by giving out bigger blocks in 1999 as per the New Exploration and Licensing Policy (NELP). Through NELP, Reliance bagged the rights to explore the D6 block.

The price was arrived by Reliance through its ‘price discovery mechanism. As per a Reliance crafter formula, user companies were asked to quote a price which gave them a choice of arriving at a value between $4.54 and $4.75 per mmBtu. Reliance initially forwarded a figure of $4.59 which was later brought down to $4.3, but Pranab Mukherjee claimed victory by announcing a figure of $4.2 per mmBtu.

The brazenness of the entire exercise by the government can be seen from the fact that the objections raised by the Principal Advisor, Power and Energy to the government of India, Surya P Sethi along with the then cabinet secretary were ignored by the government. Surya questions the recommendation saying that nowhere is the cost of production more than $1.43.

Our Take on the Subject

Now one need to keep an eye on the stock chart as stock moving above 840 will mean that stock has started awakening and any cross above 873 is an indication that stock will get into the bullish mode.

You can read Reliance stock future here. However remember that if stock breaks 796 level then it finds support at 782,752 level.