Reliance Industries Shares are down from Rs.1617 to Rs.892. What Next?

22nd March 2020

Reliance Industries Shares are down from Rs.1617 to Rs.892. What Next?

Dear Fellow Travellers,

Greetings from Hitesh! Last week the Market recovered from the yearly lows and Friday closing was good. Some stocks which had gone down to unimaginable levels have also recovered a bit. Take for example – Reliance industries made a high of 1617 on 20th December 2019 is down to Rs.892 on 18th March 2020. It is down by 45% in 3 months!! 

What may be Mukesh Bhai’s thought process?

Let us assume him as an investor for the time being. Let us see that this is the biggest holding in his portfolio and it has come down by 45% in just 3 months!!  

As per Exchange filing in December 2019, the Promotor group had a holding of 50.03%. The reliance share capital was Rs.6339 Crs. The promoter group holds Rs.3171 Crs in that capital at 50.03%. It means at Rs.1600 per share the value of Shares was Rs.5 lakh crore plus for the promotor. Now at Rs.900, it is 2.85 Lakh Crs. Loss of Rs. 2.15 Lakh Crs. 

Despite he is at the top of the company – he lost Rs.2.85 Lakh Crores!! 

What happened to his shares since 2008?

From a high of Rs.3000 in early 2008, it had gone down to Rs.280. (Adjusted for two bonuses in 2009 and other in 2017.) So, if you had 1 share in 2008, it would have been 4 shares now. The price would have been 750/-. The same touched the high of Rs.1617 in December 2019. It means he barely generated a net return of 115% in the last 12 years. 

With this fall – his shares are again at Rs.890. Close to the 2008 high price. 

It means – had he sold in 2008, he would have much loss even after 12 years. Had he kept the same in BANK FD at 7%, he would have got Rs.900 per share like interest. 

But he is still holding on and expanding his business. Today he is a leader in TELECOM. A major player in Retail and Oil. 

What does it mean for LONG TERM INVESTORS?

If you do the study of Infosys from 1999 high price and do the calculations you will have the same conclusions. Still, Narayan Murthy is holding the shares. 

Shrewdest of the investors invest with Vison / Passion and Intelligence. At any given point of time – they do not lose these three elements. They never get emotional with this kind of falls. They go back to their original plan and refresh the same. Check it whether the fall is due to a change in market mood or fundamentals of the company? If the change is due to market mood, they start adding more shares. 

As per the report – on Friday Mukesh Bhai and family increased their holding in the company. They added around Rs.900 on Friday. 

How a NORMAL guy would react?

If you share these details with the small investors whose portfolio is also down – he would have this dialogue - Usko koi FARAK NAI PADTA. 

I have often heard this dialogue from normal investors when a big guy faces losses be it RAKESH / BUFFETT or MUKESH BHAI kind of businessmen. 

Isn’t this funny? His loss of a few thousand or few lakhs is a very big loss and Mukesh Bhai's really big loss – FARAK NAHI PADTA!!

They get a kind of sadistic pleasure knowing about these kinds of people’s losses. May be due to the inherently human nature of jealousy. 

These guys will not add shares now. They will spend time in the blame game. 

What is my understanding?

1.  The market is supreme and the same for all. Be it Mukesh Bhai or be it any small investor. The market’s decision is final for all. 

2.  There is a thought process in normal investors' minds that if you know all – you can have profit only. Now, Mukesh Bhai knows the best about RELIANCE but his shares are down by 45%. So, there is a little link with knowledge and share price movement. Knowledge is individual but price movement is a collective reaction. 

3.  But ultimately the difference comes from the knowledge in PANIC situations. Look at the RESPONSE given by Mukesh Bhai to the market’s move – he added. How many small guys have added? 

What is my advice to the would-be investors?

When you are investing in the market – you are dealing with a lot many people at the same time. FII / DOMESTIC MUTUAL FUNDS / HNIs / BIG INVESTORS / INSURANCE COMPANIES / PENSION GUYS and many other esoteric and technical investors. These guys are core investors and have spent good time and money on mastering investment skills. 

I remember the famous dialogue in the movie – GURU. The movie was made on DHIRUBHAI AMBANI. He asks the reporter who is doing the study of GURU Bhai's meteoric rise in a short span – “GURU BHAI SE KEHLNA HEY to GURU BHAI BANKE KHELO”(Be guru bhai if you want to compete with guru Bhai).  

Same way, if you want to play in the market against the above kind of players, you must become like them. If you are not ready to invest your time and money in developing the investing skills – you should stay away from the market. 

We spend a good time developing the skill sets and attitudes needed for investment success with our investors. If you are serious about making money, do join us. 

Happy Investing. 

Follow me on Twitter @hiteshmparikh / WhatsApp - +91-9869425399.

Live With Passion…Invest With Passion.

HITESH PARIKH,

YOUR PERSONAL DESTINY MANAGER.