Pressure on shares increased this week after some of India’s largest retailers signaled weaker-than-expected consumer demand, raising concerns that Reliance – a major player in the segment – could face a similar slowdown. Sentiment soured after U.S. Senator Lindsey Graham proposed legislation targeting countries buying Russian oil, pushing stocks’ weekly slide past 7%, the steepest in more than 15 months.
The weakness follows a nearly 30% rally in Reliance shares last year, fueled by expectations that the oil-to-telecom conglomerate was preparing to list Jio Platforms Ltd. in what could be India’s largest IPO. Growing concerns about tougher U.S. measures against Russia have since dampened investor interest in the company, which has profited from refining competitively priced Russian crude in recent quarters.
Analysts at Goldman Sachs Group Inc. expect the company’s retail business to report slower growth during the quarter through December due to lower discretionary spending, but the same would be offset by strong growth in the energy sector.
The recent sell-off in stocks was “potentially due to concerns over refining exposure to Russian crude and weaker retail growth momentum among peers,” analysts including Nikhil Bhandari wrote in a Jan. 9 note. Despite a moderation in Russian crude volumes, they expect the company’s refining margins to receive support from tight product markets until next year.
The stock still has a buy rating from 35 analysts – the most among global oil and gas companies with market values ​​above $100 billion. Even after the recent sell-off, the shares have upside of about 16% over the next 12 months, based on the consensus price, according to data compiled by Bloomberg.
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