Reliance Power shares down 31% in 1 month. Should you buy the dip or steer clear?

Reliance Power shares down 31% in 1 month. Should you purchase the dip or steer clear?

Reliance Power shares have tumbled 31.5% over the past month, including a 5% slide on Tuesday that triggered a 3rd consecutive decrease circuit. The selloff, fueled by heightened regulatory scrutiny of group corporations and deteriorating technical indicators, has pushed the inventory effectively below key shifting averages, elevating pressing questions for traders navigating each authorized threat and market fragility.

The renewed promoting stress comes as Anil Ambani, chairman of the Reliance Group, appeared before India’s Enforcement Directorate (ED) on Tuesday in New Delhi. The questioning pertains to a widening probe under the Prevention of Money Laundering Act (PMLA), centered on an alleged Rs 17,000 crore mortgage fraud involving Reliance Home Finance Ltd, Reliance Commercial Finance Ltd, and Reliance Communications.

Market reacts to deepening probe

At Tuesday’s shut, Reliance Power was buying and selling 40.8% below its current high of Rs 45.32 and stays 55% above its 52-week low of Rs 29.21. Crucially, the inventory is buying and selling below all eight of its key simple shifting averages (5-day to 200-day), indicating deep-rooted bearishness across timeframes.

The Relative Strength Index (RSI) stands at 25.2, and the MACD is at -3.4 and stays below each the middle and sign traces, reinforcing the continued bearish pattern.

Hardik Matalia, Derivative Analyst at Choice Broking, famous that the inventory’s plunge following news of Anil Ambani’s ED summons had “triggered significant selling pressure, dragging the stock closer to the levels from where the earlier sharp upmove had originated.”Live Events“Technically, the stock has witnessed a steep correction from its recent highs, reflecting strong bearish sentiment,” Matalia said. “It is now approaching a key support zone. A breach below Rs 40 could accelerate the downside, potentially extending the fall toward the Rs 35–Rs 30 range.”

Matalia additional cautioned that the RSI is “nearing the oversold territory, but there are no signs yet of a reversal or bottoming out.” For short-term traders, he advised against new entries, noting that “attempting to catch a falling knife in this scenario could be risky without confirmation of stability.”

For investors already holding the stock, Matalia suggested that “it may be wise to exit positions on any bounce or relief rally and await concrete updates or signs of resolution before considering re-entry.”

Broader trend weak unless Rs 52.50 is reclaimed

Kunal Kamble, Senior Technical Research Analyst at Bonanza, echoed a similar negative outlook. “RPower on the monthly time frame has slipped below its 9 EMA, indicating an early sign of reversal to a negative trend,” he said. “On the weekly time frame, the stock has slipped below the 50 EMA, which further indicates a short-term trend change to negative. On the daily time frame, the stock has slipped below the 200 EMA, showing that the minor-term trend has also turned negative.”

Kamble warned that “as long as the stock trades below Rs 52.50, further selling can be expected towards Rs 39.80, followed by Rs 30.50. Any rise should be used as a selling opportunity.” He also noted that the RSI has formed a triple top on the monthly chart, “signaling caution for bulls.”

In the near term, Kamble expects “further selling can drag the stock towards Rs 39.80. Any minor rise should be seen as a selling opportunity.”

“If the stock continues to sustain below Rs 52.50, the downtrend is likely to extend towards Rs 30.50. A reversal will only be considered if the price closes above Rs 52.50,” Kamble said, outlining his 3–6 month view.

Support and resistance levels to watch, according to Kamble, are Rs 39.80 and Rs 30.50 on the downside, and Rs 52.50 and Rs 59.80 on the upside.

Regulatory heat drags on sentiment

The ED’s case spans loans from nearly 20 public and private sector banks. According to officials, RHFL alone owes Rs 5,901 crore, while RCFL and RCom owe Rs 8,226 crore and Rs 4,105 crore, respectively. The agency last month raided 35 sites linked to the Reliance Group and arrested Partha Sarathi Biswal, managing director of Odisha-based Biswal Tradelink Pvt Ltd (BTPL), for allegedly arranging a forged Rs 68 crore bank guarantee for a group company.

According to the ED, BTPL received Rs 5.40 crore from Reliance Nu Bess Ltd—parented by Reliance Power—after submitting a fake State Bank of India endorsement in response to a Solar Energy Corporation of India tender. While Reliance Group initially accused BTPL of fraud, officials now suspect collusion. “Documentary evidence reveals that apparently the two parties acted in collusion. The directors of Biswal Tradelink were found to be previous directors of Reliance Group,” a senior official told The Economic Times.

In its defense, Reliance Group said it had disclosed the matter to stock exchanges in November 2024 and had lodged a complaint with the Economic Offences Wing of the Delhi Police in October 2024. “The company and its subsidiaries acted bonafidely and have been a victim of fraud, forgery and cheating conspiracy,” it said in a statement.

Group defends its financial position

Even as the stock unravels, the Reliance Group has maintained that the loans under investigation were historical and fully serviced. “Loans extended by Reliance Home Finance Limited (RHFL) to certain private companies of the promoter of YES Bank were sanctioned on merit, following due process,” it said in a statement. “These loans were fully secured and have been fully repaid, including interest, with zero outstanding.”

It also highlighted that Reliance Power and Reliance Infrastructure are “nearly debt-free,” with net worths of Rs 16,431 crore and Rs 14,883 crore, respectively.

Still, for investors grappling with both reputational risk and a bearish technical picture, the road ahead appears fraught. Whether Tuesday’s lows offer a buying opportunity, or a trap, depends on how quickly clarity emerges from the ongoing investigations.

Also read | Swiggy vs Eternal: Which inventory guarantees better worth supply submit Q1 present?

(Disclaimer: Recommendations, strategies, views and opinions given by the consultants are their very own. These don’t characterize the views of the Economic Times)

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