Despite of rising crude oil prices and continues selling pressure from FIIs, our market has started going up from earlier in April. DIIs at the time of post budget selling pressure were buying and even now, they are also buying. However, there is now a change in pattern of buying from big Financial institutions.
Before Budget 2018 (Feb month), big investors or institutions were mostly busy in finding highly undervalued stocks or you can say highly potential stocks. Stocks those having a great opportunity in short-term was also a big bet by Financial institutions. But now this trend has taken a complete change.
Fund managers and investors are now going for quality over quantity! IT sector is a best example to understand this. But by recalling all the past accidents and events, it is also true that after having a big rally in most of the Mid-caps and small-caps in last few years, it had become necessary for largecaps to see again a fresh trend of buying.
In last few weeks, what I have observed now is that those stocks which have already seen great surge in last few months are now going in sideways zone or selling pressure zone. You can also assume that poor quality stocks are now going through under great pressure because of the recent change in market trend. And one group which was already suffering from many problems before and now facing more pressure due to recent changed market trend is of ADAG.
Earlier in December 2017, ADAG group was suffering the same pressure as it is suffering now. Only one thing that is changed now is epicenter of sell-off! Before it was RCom which was creating pressure on Group and now it is Reliance Naval, which is under serious problems.
As per media reports, auditors of the company have raised questions on the company’s capability to perform in the near future. They are concerned over company’s ability to continue its business operations in near future. This concern arised after the recent quarterly results which was very poor ( Q4 loss at around Rs 500 cr loss). Book value at the closing date of 31st march 2018 is now stand around just Rs 3/share which shows how seriously liabilities of the company is rising over its assets. And because of all these concerns, we have seen downfall of more than 30 percent in share price of Reliance Naval in this week.
Because RNaval share is decreasing sharply, we have seen some selling pressure on Rcom share also. Before, Rcom was trading around its major support at Rs 20, but huge selling pressure in RNaval forced rcom investors also to take a review on company.
However, interesting thing in this selling pressure was that other ADAG stocks were not fell as much as Rcom and Rnaval does. RInfra, Rcapital, Reliance Nippon have not faced any such selling pressure as RNaval is facing. Rpower also started falling in last few trading sessions but it even doesn’t fell as much as Rcom fell.
The major reason behind why only Rcom and Rnaval are facing selling pressure is that they are among the most volatile businesses of ADAG. However, there is also a difference in reasons behind why these are falling. Whereas Rnaval is facing selling pressure due to concerns over its going concern capability and exit of company’s stock from F&O from June onwards, rcom is sliding due to continues delay in its Jio deal. However, it is true that rcom has really reacted very more than that was expected. It was expected that delay may cause stock to slide up to Rs 20 but not as much that it will also break Rs 18 and then Rs 17 level.
One more possible reason behind this fall in Rcom stock could be the weak performance of company in Quarter ender on March 2018. Rcom had earlier told that they will come back in profit in Q4. But if it is really coming in profit, then why stock price is falling so much? Maybe, in this quarter also, it could possible to see losses as earlier.
At the time of December 2017 when almost all the experts and analyst were in the favour of that nothing is remain now in Rcom, stock gave a best bounceback ever making all the expectations of market experts wrong. Maybe, same thing could be happen with Rnaval also because order book of company consist thousand of crores pending projects. So, if we think and believe that there is nothing left now in rnaval because of recent news outflow, then I think it would be a very wrong decision.
Whenever you are going to invest in ADAG stocks, always remember one thing that you have to make extra efforts if you want to earn money from ADAG stocks. And trade ( without stoploss) or invest in ADAG stocks only when you can take higher risk. ADAG stocks are somewhat called pure operator operated stocks. And whenever there is only a operator in stock and no other big party in stock, it always become very hard for public to earn money from such stocks.
So, overall i would say that those who can take higher risk should only buy/sell/hold ADAG stocks and especially these three Rpower, Rcom and Rnaval. All other stocks are very less volatile as we compare them to these three.
At last, I would say that except of Reliance Home Finance and Reliance Nippon shares, all the other stocks of ADAG really trades at a very undervalued price from long-term perspective. And I believe that whenever the Debt issue in ADAG stocks will settle, the group will definitely see a re-rating of its different companies shares.
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