Reliance Is Biggest Sensex Loser on Oil Refining: Mumbai Mover

Reliance Industries Ltd., which reported its strongest profit growth in three years, was the biggest loser in the benchmark index as investors bet the company’s refining earnings will stagnate at current levels.

The shares fell as much as 2.9 percent to 781.35 rupees and traded at 790.15 rupees as of 10:39 a.m. in Mumbai, poised for their biggest decline since March 26. Billionaire Chairman Mukesh Ambani-controlled Reliance had risen 4.4 percent in the three days to April 16, when fourth-quarter earnings were announced. The S&P BSE Sensex index gained 0.4 percent today.

Profit at the oil refiner and explorer climbed 32 percent to 55.9 billion rupees, or 17.30 rupees a share, in the quarter ended March 31 from a year earlier. Full-year operating margins fell to 5.92 percent from 13.19 percent five years ago as natural gas production slumped and earnings from petrochemicals fell, according to data compiled by Bloomberg.

“The disappointment with petrochemicals continues and there’re no significant triggers to refining from last year’s levels,” said Deepak Pareek, a Mumbai-based analyst at Prabhudas Lilladher Pvt., who advises investors to reduce Reliance shares from their holdings. “Fundamentals are still pretty weak, so the shares are showing that. Some of the increase from the last three days is coming off today.”

Operating income from petrochemicals fell 21 percent to 71.6 billion rupees from crude oil refining and natural gas sales declined 34 percent in the year ended March 31, according to data compiled by Bloomberg. Operating income from refining crude oil into fuels rose 30 percent in the year.

Reliance, which announced a dividend of 9 rupees a share, earned $10.10 for every barrel of crude it processed in the quarter, compared with $7.60 a year earlier and $9.60 in the previous three months.

The economic downturn in Europe, slower growth in China and new refining capacity will shrink margins globally, George Nicolaides, president of refining technology at Reliance, said last month.

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