Markets nudge up on buzz of Ambani rapprochement

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MumbaiNew Delhi,: The whiff of a possible compromise between India’s largest industrial group by market cap, Reliance Industries Ltd (RIL), and its fourth largest, Reliance-ADAG, helped nudge up equity markets on Wednesday. Ambani brothers Mukesh and Anil head each group, respectively. The 30-share BSE Sensex gained 299.13 points, or 3.3%, to close at 9,370.49. The broader NSE S&P CNX Nifty matched that percentage gain to close at 2,835.30, its largest rise since December 18.

Investors who had bought into the futures market in the past few days, expecting a further dip in stocks, had to square their positions as soon as the markets opened. Arup Mishra, derivative analyst with Elara Capital, said there were a lot of such trades, known as short covering.

While industry sources said the two groups have opened a line of communication, spokespersons for both RIL and R-ADAG denied any such development. But the sources said RIL offered to acquire Anil’s stake in Reliance Natural Resources Ltd (RNRL), in return for which Mukesh offered his younger brother a 100% stake in either RIL’s SEZ venture or Reliance Retail.

While Mukesh’s SEZ project has run into trouble in Maharashtra, the retail venture is facing losses and is being restructured. Similarly, Anil’s RNRL, which needs natural gas to supply sister company Reliance Power Ltd’s Dadri plant, is embroiled in a legal dispute over pricing with RIL, which owns the fields.

The brothers were reported to have also met Ketan Parekh recently, who conveyed to them the market sentiment that they should patch up, as this would help the market caps of both companies. As on January 14, the market cap of RIL stood at Rs 2,07,880.59 crore and that of the ADAG at Rs 95,419.64 crore.

RIL’s promoters used the conversion of warrants recently to raise their stake to 49.03% from 44.80% for the quarter ended December 2008. At the same time, the percentage of GDR holdings in the company fell from 4.11% to 3.72% and that of FIIs has dropped to 15.52% from 16.97%.

At the BSE, four of the top ten Sensex gainers included companies from either of the groups. RIL shares gained 9.5%, against a sharp fall of 21% in the past four days. Reliance Communications, the flagship company of R-ADAG, closed up 10.36%. RIL will announce its results on January 22 and RComm on the 31st.