Reliance Power, a prominent name in India’s energy sector, recently made headlines when its stock hit a lower circuit, signaling a sharp 5% decline in a single trading session. After a remarkable rally that saw the stock surge to a 10-year high, this sudden drop has sparked curiosity among investors. What triggered this correction? Is it a fleeting profit-booking phase, or are deeper factors at play? This article dives into the reasons behind the lower circuit, examines Reliance Power’s recent performance, and explores the company’s future potential, including its pivot toward green energy and mutual fund investments. We’ll also discuss the broader clean energy IPO market and what it means for investors.
Understanding the Lower Circuit in Reliance Power’s Stock
A lower circuit occurs when a stock’s price falls by the maximum allowable percentage in a single trading day, halting further trading. For Reliance Power, the stock closed at ₹63.63, down 5%, after a period of intense upward momentum. This section explores the key factors contributing to this sharp decline.
Profit Booking After a Stellar Rally
Reliance Power’s stock has been on a tear, climbing 132% in just three months and hitting a 10-year high of ₹76.49. Starting from a 52-week low of ₹25.75 and a five-year low of ₹2.40, the stock more than doubled in value, delivering exceptional returns for investors. However, such rapid gains often attract profit booking, where large investors, including fund houses, sell portions of their holdings to lock in gains.
The recent trading session saw heavy selling pressure, with approximately 21.1 million shares traded. This high volume suggests that institutional investors, who had accumulated crores of shares during the rally, initiated profit booking. The stock had been a volume topper in recent weeks, indicating significant buying interest, but the subsequent sell-off reflects a natural market correction after a 70% surge in just one month.
Impact of the ASM List Inclusion
Another critical factor contributing to the stock’s decline is its inclusion in the Additional Surveillance Measure (ASM) list, specifically in Stage 1, effective June 2, 2025. The ASM framework, implemented by stock exchanges like BSE and NSE, monitors stocks with unusually high trading volumes or price volatility to prevent speculative trading or manipulation.
Reliance Power’s inclusion in the ASM list stems from its rapid price appreciation and surging trading volumes. While this measure ensures market stability, it often exerts downward pressure on the stock price, as it signals increased scrutiny. Historically, Reliance Power has exited the ASM Stage 1 list relatively quickly, as seen on September 25, 2024, and October 7, 2024. If trading volumes stabilize and price volatility subsides, the stock may exit the ASM list again, potentially easing selling pressure.
Reliance Power’s Historical Performance: A Rollercoaster Ride
To understand the current market dynamics, let’s examine Reliance Power’s historical performance. The stock’s journey over the past few years highlights its volatility and resilience.
From Rock Bottom to Remarkable Recovery
Reliance Power’s stock has seen dramatic swings. Five years ago, it languished at ₹2.40, a stark contrast to its recent peak of ₹76.49. Key milestones include:
- Three-Month Low: ₹32.90, reflecting a strong recovery to ₹76.49.
- One-Year Low: ₹25.75, with the stock surging 147% from this level.
- Three-Year Low: ₹9.05, showcasing a significant rebound.
- Five-Year Low: ₹2.40, underscoring the stock’s meteoric rise to its current levels.
This recovery stems from a combination of strategic business decisions, debt reduction, and renewed investor confidence, particularly from mutual funds.
Recent Rally: A 132% Surge in Three Months
Over the past three months, Reliance Power’s stock surged by 132%, driven by positive developments within the company. The stock’s 70% jump in the last month alone created a euphoric market sentiment, but such rapid gains often precede corrections. The recent 17% drop over four trading sessions reflects profit-taking by investors capitalizing on the stock’s high.
Why Mutual Funds Are Betting Big on Reliance Power
One of the most significant developments for Reliance Power is the influx of mutual fund investments, a stark shift from their previous reluctance to invest in the stock. In May 2025, mutual funds significantly increased their holdings, signaling confidence in the company’s future.
Mutual Fund Investments in May 2025
Approximately 25 mutual funds increased their stakes in Reliance Power during May 2025, with a total of 1,635,158 shares purchased. Notable investments include:
- Nippon India Nifty Smallcap 250 Index Direct: Invested ₹19.29 crore, increasing its holding by 2.04% month-on-month.
- Kotak Nifty Alpha 50 ETF: Invested ₹17.25 crore, with a 2.19% increase in holdings.
- SBI Nifty Smallcap 250 Index Direct: Invested ₹12.10 crore, boosting its stake by 1.96%.
- Axis Nifty Smallcap 250 Index Direct: Invested ₹11.95 crore, with a 1.11% increase.
- Bandhan Nifty Alpha 50 Index Direct: Invested ₹11.80 crore, with a 4.18% increase.
- HDFC Nifty Smallcap 250 ETF: Invested ₹9.82 crore, with a 1.73% increase.
- Motilal Oswal Nifty Smallcap 250 Index Direct: Invested ₹7.82 crore, increasing its stake by 2.13%.
- Samco Active Momentum Direct: Invested ₹7.18 crore, with a 100% month-on-month increase.
- Aditya Birla SL Nifty Smallcap 50 Index: Invested ₹5.69 crore, with a 1.11% increase.
- ICICI Prudential Nifty Smallcap 250 Index: Invested ₹4.24 crore, with a 0.94% increase.
While six mutual funds exited their positions, their shareholding was minimal compared to the aggressive buying by others. This influx of institutional capital underscores Reliance Power’s improving fundamentals and growth prospects.
Why Are Mutual Funds Interested Now?
Mutual funds were previously cautious about Reliance Power due to its high debt levels and inconsistent financial performance. However, several factors have shifted their perspective:
- Debt-Free Status: Reliance Power has successfully eliminated its debt, significantly strengthening its balance sheet.
- Strong Project Pipeline: The company boasts a robust pipeline of projects, particularly in renewable energy, positioning it for future growth.
- Improved Financials: The company transitioned from losses to profits in recent quarters, boosting investor confidence.
- Strategic Partnerships: Collaborations, such as the joint venture in Bhutan and projects with NTPC, enhance Reliance Power’s credibility.
- NCLT Resolution: The halt of National Company Law Tribunal (NCLT) proceedings against Reliance Infrastructure, a related entity, has created a positive sentiment for the group.
These developments have transformed Reliance Power from a high-risk investment to a promising opportunity for institutional investors.
Reliance Power’s Strategic Shift to Green Energy
Reliance Power is capitalizing on India’s growing focus on clean energy, aligning its business strategy with national goals to achieve 500 GW of renewable energy capacity by 2030. This section explores the company’s green energy initiatives and their potential impact on its stock.
Key Green Energy Projects
Reliance Power has secured several high-profile projects that bolster its renewable energy portfolio:
- 350 MW Solar Project: Reliance Power’s subsidiary, Reliance NU Energies, received a Letter of Award (LOA) from SJVN for a 350 MW interstate transmission-connected solar project. This project enhances the company’s presence in the solar energy market.
- NTPC Collaboration: Reliance Power secured a project with NTPC, further solidifying its position in the renewable energy sector.
- Bhutan Joint Venture: The company is undertaking a significant project in Bhutan through a joint venture, expanding its international footprint.
These projects, combined with a debt-free balance sheet, position Reliance Power to capitalize on the growing demand for clean energy in India and beyond.
The Booming Clean Energy IPO Market
The clean energy sector is witnessing a surge in Initial Public Offerings (IPOs), with an estimated ₹25,000 crore in issues expected in the near future. This trend aligns with India’s ambitious renewable energy targets and growing investor interest in sustainable investments. Notable upcoming IPOs include:
- Hero Future Energies: Plans a ₹4,000–5,000 crore IPO, backed by KKR.
- Brookfield Clean Max: Preparing a similarly sized IPO in the ₹4,000–5,000 crore range.
- Waaree Group: A solar module manufacturer aiming for a ₹4,000–5,000 crore IPO.
- Jupiter International: Targeting a ₹2,500–3,000 crore IPO from Kolkata.
- Vikram Solar: Planning a ₹1,000 crore IPO from Kolkata.
- Saatvik Green Energy: Aiming for a ₹1,150 crore IPO from Delhi.
- Faziyama Power System: Targeting a ₹700 crore IPO.
- PMI Solar Tech Solutions: Preparing a ₹600 crore IPO.
These IPOs reflect the growing investor appetite for clean energy companies, driven by government policies and global sustainability trends. Reliance Power’s strategic focus on renewables positions it to benefit from this market enthusiasm.
What’s Next for Reliance Power Investors?
The recent lower circuit and profit-booking phase may raise concerns, but Reliance Power’s long-term prospects remain promising. Here’s what investors should consider:
Short-Term Outlook: Navigating Volatility
The stock’s inclusion in the ASM list and ongoing profit booking suggest continued volatility in the near term. However, historical trends indicate that Reliance Power typically exits the ASM Stage 1 list quickly, which could stabilize the stock price. Investors should monitor trading volumes and price movements for signs of stabilization.
Long-Term Potential: A Bet on Clean Energy
Reliance Power’s debt-free status, robust project pipeline, and mutual fund backing make it an attractive long-term investment. The company’s focus on green energy aligns with India’s renewable energy goals, offering significant growth potential. The successful execution of projects like the 350 MW solar initiative and the Bhutan joint venture could drive further stock appreciation.
Investment Considerations
Before investing in Reliance Power or any clean energy IPO, consider the following:
- Consult a Financial Advisor: Seek professional advice to align investments with your financial goals.
- Conduct Thorough Research: Analyze the company’s financials, project pipeline, and market trends.
- Diversify Your Portfolio: Spread investments across sectors to mitigate risks associated with volatility.
- Monitor Market Trends: Stay updated on regulatory changes and market sentiment in the clean energy sector.
Conclusion: Is Reliance Power a Buy, Hold, or Sell?
Reliance Power’s recent lower circuit reflects a natural correction after a meteoric rise, driven by profit booking and ASM list inclusion. However, the company’s debt-free status, strong project pipeline, and mutual fund investments signal a promising future. The broader clean energy sector’s growth, coupled with upcoming IPOs, further enhances Reliance Power’s appeal for long-term investors.
For those considering an investment, the current dip could present a buying opportunity, provided it aligns with your risk tolerance and investment strategy. Always consult a financial advisor and conduct thorough research before making investment decisions. Reliance Power’s journey from a ₹2.40 low to a ₹76.49 high demonstrates its resilience, and with its focus on green energy, the company is well-positioned to capitalize on India’s renewable energy boom.
Disclaimer: This article is for educational purposes only and does not constitute financial advice. Always consult a qualified financial advisor before making investment decisions.
