Shares of Reliance Industries (RIL) fell sharply on Tuesday after analyst commentary flagged intensifying competition in the retail sector, an area that investors view as a key driver of the company’s valuation. The stock closed down 4.5%, at Rs 1507.70 after slipping as much as 5.1% during intraday trade, marking its steepest single-day decline since June 2024. During intra-day trade, RIL’s market capitalisation fell by Rs 1.09 lakh crore.
Global brokerage CLSA on Tuesday removed RIL and Nestle from its model portfolio and added Eternal and DMart.
The selloff in RIL weighed on broader markets, given the company’s heavy index presence. RIL has the second-largest weighting on benchmark indices, and its decline contributed materially to losses in both the Sensex and the Nifty, which underperformed other regional markets during the session.
Concerns were triggered by signs of stress across organised retail. Tata-owned Trent reported a 15% year-on-year decline in average revenue per square foot in the December quarter, pointing to a tougher operating environment. Citigroup said on Monday that intense competition in the sector is eroding market share for incumbents, a comment that investors interpreted as a broader sector-wide warning rather than company-specific guidance.
Outlook of Reliance’s retail arm
RIL’s retail arm, although closely held and not listed, is widely seen as central to the group’s long-term growth narrative. ICICI Securities had valued the retail business at more than $103 billion in October, roughly half of RIL’s overall market capitalisation at the time. As a result, weak commentary around peers was enough to prompt investors to reassess assumptions baked into the company’s stock price.
Tuesday’s decline also reflected profit-taking after a strong run-up. RIL shares rose about 29% in 2025, comfortably outperforming the NSE Nifty 50 Index, which gained around 11% over the same period. That out-performance was driven largely by improving prospects in the energy business, supported by stronger gross refining margins and expectations of supply-side discipline following China’s so-called anti-involution policy.
Brokerages remain divided on the outlook
Brokerages remain divided on the outlook. Morgan Stanley has flagged several potential catalysts in 2026, including a possible initial public offering of Jio Platforms, higher telecom tariffs and upside to refining margins amid benign oil prices. However, analysts caution that uncertainties around potential US tariffs on Indian exports and a patchy recovery in consumer demand could continue to cap near-term gains.
Valuations are another overhang. RIL currently trades at more than 23 times forward earnings, over one standard deviation above its five-year average, according to Bloomberg data, leaving the stock more vulnerable to negative sector signals.
(With agency inputs)