Will Reliance Industries’ show fire up the markets in 2016?
The sharp fall in share prices since the start of the year is not a surprise. The seriousness of China’s troubles was very much evident last year and it was expected to get worse thanks to the ham handed approach of the Chinese central bank and the government.
The large cap carnage that we have seen since January 1 was also expected given their exposure to global economic headwinds and the commodity price rout. What was not expected so much was the performance of one large cap, Reliance Industries. Since January 1, RIL, the third-biggest stock in the Sensex, has returned 3.8 per cent while the index has fallen by about 5 per cent.
On Monday, RIL rose 2.75 per cent and was partially responsible for lifting the market from its lows in the early part of the day. The Ambani heavyweight enjoyed a revival of sorts in 2015 when it outperformed the market but its performance was expected to be subdued in 2016 ahead of the telecom launch. The reasoning was that investors are likely to be cautious and gauge public response to the firm’s biggest ever gamble in telecom before investing more.
RIL’s strong start suggests something else is at work here. The public launch of telecom services is at least six to eight months away and Reliance will have to sort out other thorny issues as well before it rolls out services across the country.Some reports suggest that telecom business visibility has improved after the select launch for employees. That it has but is it enough to justify the recent run-up? After all, telecom operations have not started on a serious scale.