Kotak upgrades Reliance Industries to 'Buy'

Kotak assigned price target of Rs 980 for the stock

Kotak Institutional Equities has upgraded its rating on Reliance Industries to ‘buy’ from ‘add’ citing the recent correction in the stock and expected boost to profits due to a weaker rupee.

“A weaker Rupee will result in higher prices, in Rupee terms, for both products and raw materials of RIL’s refining and petchem segments and hence, will translate into higher conversion margins,” said Kotak’s Sanjeev Prasad and Tarun Lakhotia in a client noted dated August 23. “RIL’s E&P segment will also benefit from a weakening Rupee given higher realizations.”

Kotak has assigned a price target of Rs 980 for the stock. At 2:45 PM on Friday, Reliance shares were up 1.4% at Rs 817.25. 

“We see a favorable investment reward-risk balance at current levels. The RIL stock has corrected by 11% over the past one month, reflecting general indiscriminate selling in the Indian market and specific concerns,” the analysts said.

Kotak said there have been worries about a sharp decline in global refining margins, potential negative impact from export-parity pricing of diesel in India and continued decline in the company’s KG D-6 gas production.