Nomura Holdings has downgraded the rating of Reliance Industries from ‘BUY’ to ‘Neutral’. Renowned Japanese brokerage firm has downgraded its rating due to delay in hike in telecom tariff and sharp rise in valuation of Reliance Industries shares. The brokerage firm says that the outlook of Reliance’s core businesses has improved but its valuation has increased significantly due to the recent rally in the shares.
Shares of Reliance Industries may get a setback
Before the release of the second quarter results on Friday, this fall in the rating of Reliance may take a blow to its shares. For the first time in the last few years, Nomura has downgraded the rating of Reliance Industries. The brokerage firm’s analyst Anil Sharma and his associate Aditya Bansal wrote in a note on October 18 that Reliance’s core business is showing improvement. But after the recent jump in its shares, the valuation of the company has become expensive. Its shares have risen 30 per cent since the end of July. Whereas in the meantime, the Sensex has risen 18 percent.
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According to Bloomberg data, Reliance’s stock is trading at 27 times its 12-month forward earnings. This is more than two standard deviations above its ten-year average. Sharma is considered one of the top ranking analysts in the sectors he analyzes. Before joining research, he worked in the oil and gas industry for 14 years. According to Nomura’s website, nine of these years he has worked in Reliance Industries.
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