Why Did Reliance Share Price Fall After the 24th June 2021 AGM?

Introduction: The sharp increase in Reliance's share price in the weeks leading up to its Annual General Meeting (AGM) on June 24, 2021, made many investors optimistic. However, the meeting resulted in a temporary dip in the stock price. This article explores the reasons behind this unexpected fall and provides insights for investors.

Elevated Expectations

Reliance's stock was on a rising trajectory, increasing from 1900 to 2275 within six weeks prior to the AGM, fuelling hopes of announcements related to bonus issues or Initial Public Offerings (IPOs). The rally reflected the anticipation of immediate benefits. This high was short-lived as the market corrected, presenting an opportunity for long-term investors to enter the market.

Strong Monthly Closure

Despite the short-term corrections, the stock's performance in May was impressive. It closed above 2100 for the first time in months, marking a significant positive. The expectation is for the stock to continue its upward trajectory, likely hitting new heights in the near future.

Sharper Growth in Reliance

In the past three months, Reliance has seen remarkable growth. From 872 on March 23, 2020, to nearly 1978, a two-fold increase in less than a year, it is clear that the company has been performing exceptionally well. This rapid growth creates a demand for profit-taking, as investors look to realize their gains. Today, the market has decided to take its chance, and this downward correction is likely short-lived.

AGM Highlights and Challenges

The AGM itself was a success, showcasing a robust strategic plan and the company's ability to build a strong ecosystem for future growth. The positive news that was anticipated in the meeting, such as the 5G platform and Jio Mart, were already well-known and priced into the market, leaving the market reduced to gauge the true value of the meeting's presentations.

However, there were two main challenges that contributed to the share price correction:

The realignment of Reliance Jio's enterprise value after the Google deal brought the post-Google value in line with the post-Facebook deal value, reducing the initial premium. The lack of progress in the Aramco deal, despite its potential, saw the absence of any significant updates or positive remarks in the meeting.

Despite these challenges, the positive stance of the company, categorically denying further financial investment in Jio, and stating that only strategic investments would proceed, provided some relief and kept the overall sentiment positive.

Investors' Perspective

Given the current market conditions, the views expressed are personal based on the available online information and are subject to further verification. The article notes that under normal market conditions, the Reliance stock is expected to remain above 2100, marking a strong foundation for future growth.

In conclusion, the temporary dip in Reliance's share price on the day of the AGM can be seen as a rational adjustment given the market's expectations and the absence of new, highly impactful news. Long-term investors should see this as an opportunity to invest in a company with a strong track record and promising future.