Anyone can publish on Medium per our Policies, but we don’t fact-check every story. For more info about the coronavirus, see cdc.gov.

2020 Corona crash v/s 2008 Financial crash: How did Reliance stock price fare vis-a-vis crude oil & Sensex?

Image for post
Image for post

Corona-virus@2020

Corona-virus, quarantine, lock-down and travel ban are some of most commonly searched keywords on Google search engine in this year 2020 and these words reflect in price destruction across businesses globally. Crude oil (Brent) prices hit multi-year lows due to price war between Saudi Arabia (OPEC) and Russia. Businesses globally have been battered with lock-downs and travel bans ever since corona virus impact hit the world and global commodity and stock markets reflected this impact in their price.

As on 24th March’20 at the time of writing this article, Brent Crude Oil was trading around 30$ while Reliance Industries, the first Indian company to exceed $100 billion market capitalization closed the day at ₹ 946 (NSE-India) and Sensex at 26,674.

Image for post
Image for post

Year-to-date in 2020, price destruction was witnessed with Brent crude oil losing 54% and Reliance Industries 37.31% and Sensex 35.42% respectively.

Image for post
Image for post

Financial crisis@2008

Crude prices soared to all-time high of 140+ $ in 2008 July before Lehmann collapse while Reliance Industries and Sensex saw a peak in the same year of ₹ 748 (NSE-India) and 20686.

Image for post
Image for post

Journey from 2008 to 2020 saw crude (Brent) gyrating between a high of 125$ and low of recently touched 24$ per barrel and during same period Reliance stock witnessed a high of ₹ 1599 and recent low of ₹ 884. Sensex also saw a high of 41945 and recent low of 25981 levels.

Way Forward

Crude oil prices are staring at lower levels in the nearby future as price wars are not helping OPEC which in turn is beneficial to all end users of crude oil. Both Reliance and Sensex made new highs after financial crisis hit the global markets in 2008 and doubled till corona-virus happened this year. With crude oil prices at 17-year low levels both India being an importer of oil (85% of its oil is imported) and Reliance being a bulk purchaser of refinery oil are set to benefit. Reliance’s gross refinery margins are expected to take a hit due to corona-virus but at same time lower crude oil prices would help to improve its margins by 150 to 200 basis points over the next one year. With company aiming to become debt-free in the next 12 to 18 months, crude oil price fall is a blessing in disguise. Similar to the recovery of the stock price after 2008 market crash, Reliance is expected to revisit its recent highs as markets recover.

Kiran
Managing Partner@C2C, Pune

The article is personal opinion of the author and is not a recommendation for investing or trading. Feel free to write to us- c2c.careerconsulting@gmail.com

Written by

Education | Research | Consulting

Get the Medium app

A button that says 'Download on the App Store', and if clicked it will lead you to the iOS App store
A button that says 'Get it on, Google Play', and if clicked it will lead you to the Google Play store