Last year when I started accumulating Reliance Petro (RPL), I wrote about my expected returns. I was expecting 20 to 30% annual growth but ,pleasantly, my expectation fall short compared to the bullish run of RPL. From June’06 to mid March’07 RPL was bouncing between the narrow range of 68-72. On 23-03-2007 it broke the upper limit to Rs.75-00 and thereafter it has not looked back. Withing three months, in June’07, it reached the psychological upper limit of Rs.100-00 and it was tempting to sell some of holdings as it was giving handsome returns of about 50% on my average purchase. Eventually my greed ruled over the decision to partial profit booking.
Again, I waited watching RPL to climb point by point and consolidating well between 105-115 before it reached to 120-00. I was comforted about my decision to hold as RPL did not give any good opportunity to buy at lower price. (However it reached to 96 level, but considering the commissions, other charges and capital gains there was no room for any profit).
RPL showed another positive sign during the recent sub-prime triggered crash, that it did not go below 105-00 , that is too for once or twice and showed upsurge as soon as the market was out of the panic making new highs. From the first trading day of September’07 it started moving from 116-00 and the close on 20th September was 138. However on next day , 21-09-2007 it opened at 139-00 and went to the high of 158-00 closing at 155-00 providing some 130% of annual returns.
RPL has special place in my portfolio, as 25% of funds are allocated to it and therefore change of Rs.2-00 gives 2% of return on entire portfolio. Some may think that I am over invested in the particular script, yes I am, but thankfully my gamble turned out to be safe.
Now about the future prospects , everybody has wild guesses about it. However, some expert recommends to book some profit now. But I plan to hold it more and my first sell probably will take place soon before the production starts in the end of 2008 ,if nothing extraordinary happens in between.
Some people worry about the merger of RPL with Reliance Industry (RIL). However in my view there is not much to worry as in case of the merger still the management remains same.
My guess is that RPL will move upwards till the production date, as people are buying with high expectations of splendid earnings. So until the production does not start the expectations will fuel the price and as there will be hardly anything to effect the price , except the announcements about how soon the refinery will start. But after the production a factual picture will emerge and earnings and profit will effect the price growth.
Looking to the pace , I believe the price will reach to 250-00 if not more, by Dec’08 , or earlier of the production commence earlier than that. If it reaches , somehow, to 300-00 I will sell 20% stake to encash my original investment.
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