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Reliance Power shares have experienced a significant drop, hitting a 5% lower circuit for the third consecutive session on October 7. This trend reflects a wave of profit booking among investors, highlighting the volatile nature of share market investment. Currently, the stock is trading 11% below its recent 52-week high of ₹53.64, reached just last week.

Rapid rise followed by a sharp fall

The stock surged over 60% in the previous month, driven by strong investor enthusiasm after the announcement that the Anil Ambani-led company had become debt-free. However, following this remarkable rally, many investors began to secure their profits, coinciding with a broader market downturn.

On September 18, market sentiment towards Reliance Power improved significantly. This followed the news that the company had been released from its corporate guarantee obligations tied to the outstanding debt of its subsidiary, Vidarbha Industries Power Limited (VIPL), which amounted to ₹3,872.04 crore.

The resolution with CFM Asset Reconstruction Private Limited (CFM) played a crucial role in this turnaround. As part of the agreement, all shares of VIPL were pledged to CFM, resulting in Reliance Power's release from its previous corporate guarantee obligations.

Major contract win and stock performance

Reliance Power also made headlines by securing a substantial battery storage contract worth 500 MW/1000 MWh from the Solar Energy Corporation of India (SECI). This agreement positions Reliance Power as a prominent player in one of the world's largest standalone battery energy storage projects.

Despite the recent downturn, Reliance Power shares are trading above their 5-day, 50-day, 100-day, and 200-day moving averages. The stock's relative strength index (RSI) stands at 79, indicating overbought conditions.

As of 1:22 PM on October 7, Reliance Power's shares hit the 5% lower circuit, trading at ₹48.40 on the NSE. Year-to-date, the stock has surged approximately 102%, outperforming the Nifty, which has returned only 15%.

In the past year, Reliance Power shares have increased by 172%, more than doubling investors' money, while the Nifty has gained around 28% during the same period.

Key takeaways

  • Reliance Power shares have hit a 5% lower circuit for three consecutive sessions.
  • The stock is trading 11% below its 52-week high of ₹53.64.
  • Investors began profit bookings following a surge of over 60% in the last month.
  • Reliance Power is now debt-free, having resolved obligations with CFM and secured a major battery storage contract.
  • The stock has increased by 102% year-to-date and 172% over the past year, significantly outperforming the Nifty index.

This scenario illustrates the volatile nature of share market investment and the importance of timing in making profitable trades.