Intraday for ADAG – What to do with shares of Anil Dhirubhai Ambani Group after SEBI’s order?

by salman on 17/01/2011 · 0 comments

Well, everyone is fully aware of what has happened with the shares of Anil Dhirubhai Ambani Group (ADAG) since the consent order passed by stock market regulatory SEBI with regards to the ‘possible’ violation of security market norms by RNRL (Reliance Natural Resources Ltd) and Reliance Infrastructure. Be it Reliance Infrastructure (at 7.84%) or the likes of RelianceMediaWorks (at 8.45%), Reliance Power (at 6.13%) and Reliance Communications (at 4.77%); all of them have faced the heat after SEBI’s announcement.

To summarize SEBI’s order – RNRL (Reliance Natural Resources Ltd) and Reliance Infrastructure are not permitted to invest into any listed share in the secondary market (also called as aftermarket, it is the financial market where investors can purchase or sell futures, options, stocks and bonds from other investors. An IPO is therefore a part of primary market.) This restriction won’t apply on mutual funds and the end date of this restriction will be December 2012. Individuals who will face the heat of this order are ADAG chairman Anil Ambani, Reliance Power CEO J P Chalasani, Vice-Chairman Satish Seth, Director (operations) S C Gupta and Reliance Infrastructure’s CEO and Whole-time Director Lalit Jalan. The order does not apply on primary market, open offers, and buy backs.

Reliance Power

P/E (price to earnings ratio) for Reliance Power is super high (at 121) and it is trading at 138 as compared to its book value of 58. The stock might seem at a good price but to me it looks unnecessarily overpriced. By no means will I suggest anyone to stick to this stock or even do a fresh investment. The stock is speculated to go further down thus trading options for Reliance Power aren’t suggested. Reliance Power enjoyed support at between 139 and 141 but as it has been dragged out of that margin henceforth it is tough to rely on this.

Reliance Mediaworks

Regular traders may buy this stock for 160 – 165 and target gains at 180 – 190 though it is suggested to stay away from the same at current levels. Investors should stay away from the stock as no significant returns are expected from the same.

Reliance Communications

The above telecommunications stock is surely an under-performer when compared to its counterparts. The book value of Reliance Communications is 244 though the stock is trading at the minor price of 132. One should rather wait for the price range of 120 – 125 before buying as it can enjoy some support at that level.

Reliance Infrastructure

The current trading for Reliance Infrastructure under ADAG is 740 as compared to its book value of 537. It enjoys the P/E of 21 which happens to be in line with the rest of the counterparts in this sector. I expect a gain of not more than 10 – 15% at current levels so investors can take the risk if they are ADAG fans!

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