Reliance Industries (RIL), the country's largest company by market capitalisation, was the second biggest loser on the Sensex, the BSE's benchmark index, today amid fears that the government would impose a tax on private oil companies for making windfall profits.
The share price of RIL, which has the highest weightage in the Sensex, fell by 3.38 per cent to close at Rs 2,028.15. The stock, which opened at Rs 2,099 today, touched a low of Rs 1,998 during the trading session.
The Reliance Petroleum (RPL) stock ended the day 2.77 per cent down at Rs 166.55.
It dipped to a low of Rs 165.25 after opening at Rs 173 today. The stock is a key constituent of the broader index S&P CNX Nifty of the National Stock Exchange (NSE).
Shedding its intra-day gains of more than 2 per cent, both the Sensex and Nifty closed the day with marginal gains of 0.54 per cent and 0.35 per cent, respectively.
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The fear that the private oil companies would see an erosion in their bottomlines if regulated to pay a tax on windfall profits also resulted in private sector Cairn India falling by 5.49 per cent to Rs 237.70 and Essar Oil 1.95 per cent to Rs 176.20.
The Oil & Gas Index fell the most among the 13 sectoral indices, ending 2.03 per cent lower at 8,882.14 points.
"There is a fear in the market that the government would impose a windfall tax on the private oil companies. This is a demand by the Samajwadi Party (SP), which is now on the verge of joining the government," Vinay Nair, research analyst, Khandwala Securities, said.
Another reason that market sources assign to the fall in the stock prices of RIL group companies is that market players view the Samajwadi Party as anti-Mukesh.
The share price of yet another Mukesh Ambani group company, Reliance Industrial Infrastructure (RIIL), was hammered.
The stock slumped 2.05 per cent to Rs 751.40. It touched an intra-day low of Rs 741.15 from its previous day's close of Rs 767.15.
However, investment advisor S P Tulsian said, "The fall in the share prices (of Mukesh group) could be due to a sudden spurt of reaction by some market forces.
"The share prices of RIL is likely to recover very soon, but if that does not happen the prices go below Rs 2,000, then it may worsen the situation."
Officials in the petroleum ministry, however, declined to comment on whether a windfall tax would be imposed or if the private oil companies would be asked to bear a part of the oil subsidy burden. "It's purely a political move," one official said.
The Mulayam Singh-led SP has said that the tax proceeds can be used to fund part of the subsidy bill the government-owned oil marketing companies are bearing.
Indian Oil Corporation (IOC), the largest of the government-owned oil marketing companies gained 1.96 per cent to Rs 348, while Bharat Petroleum Corporation (BPCL), the second largest marketer of petroleum products, rose 4.34 per cent to Rs 238.20 today. Hindustan Petroleum Corporation (HPCL) rose 4.20 per cent to Rs 192.20.
IOC, BPCL and HPCL sell petrol, diesel, cooking gas and kerosene at subsidised prices and incur under-realisation, which is partly compensated by the government through oil bonds. The oil producers are compensated in the form of discounts.