Yesterday saw Reliance Industries' stock surge almost 11%... in one single day! This takes the stock's price to an eight year high. The trigger was apparently simple. A day earlier, Reliance Jio announced that it will end Jio's free data services and start charging its customers from 1 April. Voice calls and roaming, however, would continue to remain free.
But what seems mind-boggling was magnitude of the gain. Reports point out that this takes the rise in RIL's market capitalization to a mammoth US$ 5.8 billion or so. This rise in itself is close to the total market value of Idea Cellular Ltd, India's second largest telecom company.
Investors seem to be jumping the gun. Despite this announcement of intent, there are so many things that still remain to be seen.
How many customers remain once the company actually starts charging them, how much competition intensifies post that period, what will the company's economics look like at those rates, how much longer before there is any chance of break-even, etc are question that still have no easy answers.
But that doesn't seem to have stopped investors from going ahead and building castles in the air anyway.
Data Source: Ace Equity