After falling for eight consecutive sessions, shares of Reliance Industries Ltd gained nearly 3% on Tuesday following the news that the government cut windfall tax on domestic crude oil production to ₹3,500 per tonne from ₹4,400 while increasing the export duty on diesel from ₹0.50 per litre to ₹1 per litre again.
However, the Centre kept both petrol and Aviation Turbine Fuel (ATF) exempted from the export levy.
On the technical front, the stock in the past eight consecutive trading sessions has lost 9%.
The shares of the company were among the positive contributors of Nifty 50 on Tuesday after hitting 19-month low in Monday's session.
According to analysts, Reliance as 'sell' is on strong support and can rally back to ₹2,350 in the near term.
However, global brokerage CLSA has reiterated 'buy' rating on stock and expects 35% upside to its target price of ₹2,970.
As per the brokerage report, the stock has fallen by about 20% in less than four months, taking it to just 5% above a conservative valuation. Further, the ramp-up of its fast-moving consumer goods (FMGC) business, launch of Airfiber to catapult wireless broadband penetration and a new affordable 5G smartphone to monetise its pan-India standalone 5G network by end-2023 along with an IPO of Jio and/or retail are all possible large triggers in 2HFY24.
"Cess has been decreased to nearly US$ 6/bbl (barrel) from March 21 in the seventeenth review of windfall taxes. This will decrease cess of domestic oil production companies," said ICICI Direct Research.
According to Avinash Gorakshakar, Head Research, Profitmart Securities, this is positive for oil companies as this will reduce the tax burden and also with crude prices down, this will also benefit them in increasing their gross refining margins (GRMs) going ahead.
However, oil and gas companies such as Oil India Ltd, Oil & Natural Gas Corporation Ltd (ONGC), and Mangalore Refinery and Petrochemicals Ltd were down over 1% due to profit booking.
Most of the analysts are bullish on ONGC and expect positive traction in the near term.
Also Read: Windfall tax: Why do governments around the world impose it?
