The stock of Reliance Industries has been one of the best performing stocks in the market in the past 4 months, and in fact, helped the benchmarks - Sensex and Nifty - remain at elevated levels. Though the stock tumbled 3.12 per cent on Wednesday, it has produced an handsome returns of almost 40 per cent in the last one month.

Analysts expect net profit to slip 30-40 per cent y-o-y around ₹6,500-7,500 crore while consolidted revenues to slip around ₹1 lakh crore. Due to Covid-19 lock-down impact, analysts impact energy and retail business, though telecom business may come to its rescue to a large extent.

Downgrades by analysts

Two prominent brokerages have downgraded Reliance due to the sharp run the share price.

CLSA, in a “Time to pause research note”, has raised the target price to ₹2,250 a share from ₹1,753, but downgraded its rating from ‘buy’ to ‘outperform’. It, however, projects Reliance’s market cap to rise to $220 billion by March 2022, but said, large valuation surprises may be difficult in the near term.

Edelweiss Securities said: “We turned very bullish on RIL with our Braveheart ‘buy’ in 2016; four years on and a 4x rally since, we believe the stock’s primary triggers—deleveraging, asset monetisation and digital momentum — have played out”. It now downgraded the rating to ‘Hold’ with a target price of ₹2,105.

Will it beat four-month blue?

In the last 10 years, the stock has seldom closed in the positive territory for more than four consecutive months. Current four-month rally is the ninth such occation.The four-month rally is followed by a round of profit booking in the 5th month with the stock closing in the negative territory.

An exception has been the period December 2015, wherein the stock closed in the positive territory for the 5th month also. However, a steep decline of 14 per cent was observed in the 6th month, according to a broking firm.

So, it will be interesting to know, how Reliance Industries will close in August?

Partly-paid outshines

Reliance PP, which got listed on June 15, 2020, has given returns of massive 86 per cent in 7 weeks against the return of 34 per cent by Reliance Inds in the same period.

“Reliance has been one of the best performing stocks in the market in the past 4 months, and has contributed to the large part of the Nifty gains, but an interesting aspect which is not so well known in the market is that Reliance Partly Paid shares has done even better than Reliance,” said Hemang Jani – Head Equity Strategy, Broking & Distribution, Motilal Oswal financial Services.

F&O pointers

Reliance Industries futures saw a healthy rollover of 40 per cent to next month series. Reliance August futures is closed the day at ₹2,101.70, a good premium against the July contract value of ₹2,096 and the spot value of ₹2096.95.

Option trading indicates concentration of open interest positions at 2000-strike put and 2300-strke call.

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