Here's why CLSA and Edelweiss have downgraded Reliance Industries' stock

Edelweiss Securities notes that the stock’s primary triggers – deleveraging, asset monetisation and digital momentum – have already played out.

Market News: It has been a dream run for Reliance Industries’ (RIL) stock in calendar year 2020 (CY20). From hitting a low of Rs 868 on March 23, the stock has skyrocketed over 150 per cent to a record high of Rs 2,199 on July 27. The stellar rally came on the back of a series of big-ticket investments by marquee names such as Facebook, Google, Intel Capital, and Qualcomm Ventures into RIL’s digital arm, Jio Platforms. Further, the company’s announcement of becoming a net-debt free entity way before its schedule of March 31, 2021, made Street in awe of RIL, thus firing up the stock price.

However, not everyone looks convinced with the current valuation of the stock and believes that the market is way too optimistic on Mukesh Ambani-controlled RIL, overlooking the risks associated with it. For instance, Edelweiss Securities, in its report dated July 27, notes that the stock’s primary triggers — deleveraging, asset monetisation and digital momentum — have already played out. Also, the current exuberance witnessed in the stock seems redux of euphoria seen earlier, in 1994 (India liberalisation), 2000 (Y2K bug), and 2008 (KG-D6 offshore gas field), which suggests associated risk is high. Edelweiss has downgraded the stock to ‘Hold’ from ‘Buy’ with the target price of Rs 2,105.

Edelweiss Securities notes that its two-stage reverse-discounted cash flow (DCF) analysis of RIL stock shows that the market is baking in high earnings per share (EPS) growth, particularly for Jio Platforms – 35 per cent compound annual growth rate (CAGR) and 31 per cent for Reliance Retail sustaining over the next ten years, which by any measure is a tall ask.

Is it the best time to buy a house? Yes, say experts

In a recent interview, Keki Mistry, chief executive at HDFC said it is best time to buy a property

 

#LATEST | Lower prices, lower interest rates and rising affordability have made it the best time to buy residential properties, say experts.

In a recent interview, Keki Mistry, chief executive at HDFC bank said it is the best time to buy a property.

" First, by virtue of the fact that interest rates are significantly low. Since 2008, e whave not seen rates as low as this. I don't believe rates will go down any further.Second, property prices haven't gone up in recent times so one would believe there is time correction of prices. Third, all incentives are provided by the government for people to buy houses,"Mistry said.

Rates:

Mortgage rates have come down by 150 basis points in the last two years bringing them down to 12-year lows, and this is gradually improving affordability. Every 100 basis points mortgage-rate cut is equal to 5-6 per cent price cut, CLSA has noted.

Prices:

Housing prices fell by 1.67 per cent to Rs 6,185 per sq ft in Q4 (January- March) from Rs 6,290 per sq ft in the December quarter in major cities such as Gurugram, Noida, Mumbai, Kolkata, Hyderabad, Bengaluru, Pune and Chennai, data analytics firm PropEquity has said.

According to international brokerage firm CLSA,the price of a mass-premium house located in a metro city suburb having a ticket price of Rs 60 lakh has remained flat on a year-on-year basis.

"For buyers it is a good time to buy as buyers have remained stagnant in the last three years. In fact they can get discounts. But for investors, if they get a distressed valuation and no completion risk, it is not a good time," Amit Bhagat, chief executive at ASK Property Investment Advisors.| READ MORE..