Can expect 15%-20% gain in next one year if one enters Reliance now: Daljeet Singh Kohli

Now the reason is that the market for the last few days was abuzz that some kind of tax was coming in that is why even though we all were saying that spreads are highest in their history, Reliance’s this quarter’s profit will be the highest ever in their recorded history. That means that the market was aware that the spreads are gaining and the company will make bumper profits but some of that might go back to the government because there are some talks about windfall tax. So it was not getting factored in the stock price to a large extent.

Over the last two days, they came out with this policy about domestic oil producers being allowed without allocation to OMCs etc. People mistook that probably now with reforms out of the way and windfall tax base not coming, we saw some movement in the Reliance stock in the last two days. Although all other foreign brokers raised their targets because there was a lot of positive cash inflow from higher crude prices.


Which are the worst case scenario and the best case scenario for Reliance post this news because earnings will get impacted?

Yes, earnings will get impacted but remember that earnings is anyway inflated for this quarter and everybody was aware that this is a short term phenomena. The $38 GRM and $25 of cracks will not remain always. It would have been taken as a one-off gain.

So I think earnings will reduce but they will not reduce to a large extent because for the overall full year FY23 and FY24, nobody has raised the target or earning numbers to a very large extent as everybody was aware that this will be one-time and after that, things will come back to normal.
Also we have to keep in mind that Reliance’s valuation now is not just for the oil business. It is the other two businesses – retail and telecom – that are also driving a large part of the valuation. So ultimately this is a good price band of Rs 2,300-2,400. One can enter here and in the next one year, 15%-20% gain is easily possible now at this time.

What did you buy in Friday’s market fall because that gives us an idea of which way you are gravitating towards?

We are constructive on IT, especially after this fall of 20-30% in the last three months and we are taking a call only on the front liners. So, Infosys and Wipro are there in our portfolio. We are adding to them.

Others we are still not adding. Earlier we played this entire cycle through a lot of midcaps and others but now we will wait for the commentary and the numbers from this quarter and see how they pan out. We are expecting that numbers will not be very bad because the demand is good enough and last quarter they all had good margins.

But what will be the commentary and what is the outlook on client expenditure is very important. Till now, no company has given any hint of reduction in demand or any kind of let up in that specs but there are lot of services which are moving around which tells us that many CIOs are thinking of reducing this. So whether that is really reflecting in the business for these companies will be known from Q1 or Q2 numbers.

This quarter probably will be seen through and in this bargain, a lot of big companies like Infosys etc. have come down to a very attractive level. We have added them into the portfolio they already have. We are just increasing their position.