Reliance Power stock hits 5% lower circuit on profit booking, extends losses to 17% in 4 sessions after rallying 70% in 1 month

Mumbai, June 17, 2025 — Shares of Reliance Power Ltd hit the 5% lower circuit in early trade on Tuesday, continuing their downward spiral for the fourth consecutive session. The stock has now corrected over 17% in four sessions, a sharp reversal from its 70% rally in the past month, as investors rushed to lock in profits amid stretched valuations.

Volatility After a Meteoric Rise

After gaining significant traction from mid-May to early June—driven by improved financial performance, debt reduction progress, and renewed investor interest in power sector stocks—Reliance Power's stock surged from ₹18 to nearly ₹31. However, with the recent slump, it has retraced to around ₹25.60, the lower circuit price for the day.

Market experts attributed the steep fall to profit booking, technical resistance, and an absence of fresh positive triggers.

"The recent rally in Reliance Power was largely sentiment-driven and speculative in nature. Once the stock touched a key resistance zone around ₹30, short-term traders started booking profits, leading to sharp declines," said Anand Dube, Senior Technical Analyst at Choice Broking.

Frenzied Retail Activity Slows Down

The rally in Reliance Power was fueled by high volumes from retail and small-cap investors, many of whom were chasing quick returns following the broader rally in infrastructure and energy stocks. The stock saw a nearly 200% jump in average daily volume on the BSE during the peak rally phase.

However, the selling pressure now indicates that many retail traders are exiting, likely due to margin calls or in anticipation of further corrections.

“Retail investors often get lured by quick run-ups, but once momentum fades, the exits are usually rushed and disorderly,” noted Rashi Mehta, Portfolio Manager at Surya Capital. “While Reliance Power has long-term restructuring plans in place, the short-term outlook is cloudy due to speculative excesses.”

Fundamentals Show Gradual Improvement

Despite the recent correction, the company’s financials have shown gradual improvement. For the March quarter, Reliance Power posted a net profit of ₹274 crore, marking a return to profitability after several quarters of losses. The company also reported a significant reduction in debt, aided by asset monetization and support from the Anil Ambani-led Reliance ADA Group.

The management has been actively working on restructuring its liabilities and streamlining operations, especially in its thermal and solar power businesses. This includes selling stakes in certain SPVs and entering strategic partnerships.

“Reliance Power is taking the right steps to clean up its balance sheet. However, execution risk remains high, and any deviation from its deleveraging path could again spook investors,” added Gaurav Shah, energy sector analyst at Motilal Oswal Securities.

Broader Market Context: Sector Rotation at Play

The Indian equity markets have been witnessing sector rotation, with recent focus shifting from energy and infra plays to FMCG and technology stocks. This has contributed to outflows from high-beta names like Reliance Power.

The Nifty Energy index has underperformed in recent sessions, while the Nifty 50 remains resilient at record highs, indicating investor preference for large-cap stability over mid-cap volatility.

Moreover, global cues have also turned cautious with the US Fed hinting at maintaining higher interest rates longer than anticipated, dampening the appetite for risky assets in emerging markets.

Investor Outlook: Should You Buy the Dip?

For retail investors wondering if this is a good opportunity to enter, analysts advise caution.

“A correction was overdue after the massive up-move, and there may still be some downside left. Fresh entry should only be considered if the stock consolidates around the ₹22-₹23 levels and shows signs of renewed buying with volume support,” said Priya Rawat, Technical Strategist at Axis Securities.

From a long-term perspective, the company’s ongoing restructuring and commitment to becoming debt-light could unlock value. However, volatility will remain high, and investors must brace for swings.

Reliance Power’s recent fall underscores the risks of speculative rallies in penny and low-float stocks. While the fundamentals are gradually turning around, the stock's sharp moves remain largely sentiment-driven. Until there is more clarity on sustainable earnings and execution of its turnaround plan, cautious optimism may be the best approach.