Reliance shares are down 26% this year. What could turn them around?

Reliance Industries, a major heavyweight in Indian stock market indices, is facing a tough year. On October 13, the stock dropped to a new 52-week low, marking a difficult period for one of the country's most widely held companies. Since the start of the year, the stock price has fallen by 26 per cent, leaving many investors wondering if a recovery is on the horizon.

Why the stock is down

Several factors have combined to put pressure on Reliance Industries this year. The retail business, which usually drives growth, has seen a slowdown in demand. This has directly impacted the company's performance, as retail is a significant part of its total income. Additionally, the company has dealt with delays in expected telecom tariff hikes. Tariff hikes are essential for telecom players to increase their average revenue per user, or ARPU, which is a key metric for measuring how much money a company makes from each customer. When these hikes are delayed, it affects the expected earnings growth of the telecom arm.

Another factor dragging the stock down is the uncertainty in fuel exports. Reliance operates one of the world's largest oil refining complexes, and its export business is sensitive to global market conditions and government policies. Shifts in these areas have created doubt about the company's ability to maintain high margins in its oil-to-chemicals business. These three issues—retail, telecom, and fuel exports—have created a perfect storm for the stock in 2024.

The next two weeks

The market is now looking toward the next two weeks as a potential turning point. During this time, the company will release its Q2 results for the current financial year. Investors will pay close attention to the profit margins and revenue growth across its key business segments. The results will provide the first real look at how the company performed during the recent months, especially under the pressure of a slowing retail environment.

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Beyond the quarterly numbers, there is talk about the potential listing of Jio. A public listing of the telecom business could unlock significant value for shareholders. Any concrete update or timeline regarding this move will likely be a major point of discussion among market analysts and investors. Furthermore, any news or clarity regarding a possible hike in telecom tariffs would be welcomed by the market, as it could signal a shift toward better earnings for the telecom division.

What investors are watching

For those tracking the stock, the focus remains on whether these upcoming events can provide a fresh trigger for growth. The 52-week low reached in mid-October serves as a reminder of how much the stock has struggled to find support this year. A 52-week low is the lowest price a stock has traded at over the past year, and it often indicates that sellers are currently in control of the price action.

The company's ability to overcome the retail slowdown and improve its telecom margins will be critical. If the Q2 results show that the company has managed these challenges well, it could help restore investor confidence. Conversely, if the results reflect the same problems seen throughout the year, the stock may continue to face difficulty. The market often reacts sharply to earnings reports, especially for large companies like Reliance, as they influence the broader Sensex and Nifty indices.

As we move through these next few weeks, the market will look for clear signals from the management. Whether it is through the earnings report or updates on the telecom front, investors are seeking reasons to believe that the worst of the decline is behind them. For now, the stock remains in a wait-and-see mode, with the performance of its core businesses over the next few days acting as the main driver for its future path.

This information is for educational purposes only and is not investment advice.