Business: Reliance Industries Ltd (RIL) may outperform the Nifty going forward, JM Financial said in a technical note ahead of the oil-to-telecom major’s meeting on bonus shares on September 5. “After a decline from the highs of Rs 3,218, the RIL stock is forming a higher top higher bottom, a bullish pattern. It has started trading above all its key long-term and short-term EMAs, indicating further strength ahead,” JM Financial said. The domestic brokerage said all major RIL sell-offs in the last 10 months ended marginally below the 100-day EMA level, which is currently at Rs 2,958 level. On Tuesday, the stock was trading flat at Rs 3,033.
The September F&O series began with a cumulative future open interest of 48.7 million shares against the average of 40 million shares in the previous three series. JM Financial said most of the accumulation is on long term basis, indicating that bullish sentiments prevail on the counter.
Reliance Industries shares have underperformed Nifty by 8 per cent in the quarter so far. Compared to NSE200 weighting, mutual funds hold a low weight on the stock.
“Reliance’s ratio on Nifty (currently at 0.1205 levels) is trading close to the post-Covid-19 low of 0.1159 levels, it has managed to find support at 0.1159-0.12 levels on multiple occasions in the last 4 years, indicating low chances of a breakdown. Over a 4-year data window, the ratio is trading at 0.8 standard deviations from the mean level of 0.1294. It is at its 15 per cent range,” JM Financial said.
The stock has been in the news recently, as the company said on the day of its 47th AGM that its board will meet on Thursday, September 5, to consider and recommend to shareholders for their approval the issuance of bonus shares in the ratio of 1:1. At its AGM, RIL did not announce any plans to monetise Reliance Jio Infocomm and Reliance Retail Ventures Ltd, but came out with a clear roadmap on the new energy business, which impressed analysts. “RIL remains our top pick. We expect continued strong earnings traction contributed by Jio (recent telecom tariff hikes, 5G rollout and ramp-up of home broadband) and retail (market share gains and higher growth in retail led by new commerce). We firmly believe this is a long-term investment bet that will add to shareholder returns in the coming years given the strong prospects in the business and potential value unlocking from the retail, digital services and financial services portfolio,” said Sharekhan
