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Reliance share price falls 7% on excise duty hike on fuel, gov slams additional tax on domestically produced crude

Jul 1, 2022

Reliance Industries (RIL) share price tanked more than 7 per cent on Friday, its biggest decline in about 18 months. The sharp drop can be attributed to the government levying additional tax on domestically produced crude oil to take away windfall gains, according to experts. “Reliance is witnessing a sharp fall after the Government has levied taxes on windfall gains made by domestic refineries. Earlier, Reliance was firing on all cylinders but now there is a break in its refinery business as the commodity cycle is also reversing however other verticals have strong growth potential,” said Santosh Meena, Head of Research, Swastika Investmart Ltd. 

The Centre today increased the export duty on petrol, diesel, and ATF. Export duty on petrol has been raised by Rs 6 per litre and Rs 13 per litre on diesel. Export duty on ATF has been upped by Rs 6 per litre. Centre also slapped a Rs 23,230 per tonne additional tax on domestically produced crude oil to take away windfall gains accruing to producers from high international oil prices. The move is expected to dent Reliance profits, of which the oil refining business was roughly 40% in the quarter ended 31 March 2022. Open interest in RIL’s July contract soared 11% to 148,733 as traders built up short positions in wake of hefty export duties on fuel.

“Reliance stock fell after the government levied tax on windfall gains made by domestic refineries and exploration companies and also levied export tax on refining products out of India. However the Reliance’s export oriented unit exporting such products may be exempted from such tax. The recent fall in crude oil prices and the softening of the refining margins also seem to have played a part in the fall of Reliance stock price,” HDFC Securities told One FinancialExpress.com.

Some investors will look for buying opportunities in this correction ahead of the AGM expected in July end because there is a buzz of some major announcements especially a path for separate listing of Jio and Retail businesses. Technically, investors should watch out for the 2,400-2,350 demand zone because if it manages to hold this area then we can expect a recovery while if it slips below the 2,350 level then it may head towards the 2,200 level. On the upside, 2,600 is a critical hurdle; above this, we can expect a fresh expansion phase,” Meena added.

“Shares price of Reliance Industries declined as much as 8.69 per cent in morning trade, the largest intraday fall since November 2022, after government raised tax on exports of petrol, diesel and ATF. On the downside, 2370 maybe act as a support level; if it will break this level then, 2180 will be the next support. While on the upside 2500 will act as a resistance level above this, we can expect a run-up towards Rs 2680+ level. Investors who have the long position can maintain a stop loss of 2150. New investors should wait to close above the 2500 level,” said Akhilesh Jat, Category Manager – Equity Research, CapitalVia.

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