RIL has held this tech support level since 2015. Can it slip below it now?

The stock of Reliance Industries (RIL) opened weak on Monday post the results annoucement made post market hours on friday. The shares were down over 2.5 per cent in intraday deals, as the benchmark indices BSE Sensex and Nifty 50 opened gap-down following weak global cues.

The Mukesh Ambani-led company posted a jump of 22.50 per cent in its consolidated net profit (YOY) in the recently concluded quarter on account of higher refining margins, telecom and digit growth, and a push in the retail business. 

"A refining Golden Age, tightening global gas markets, and improving telecom subscriber quality point to a over $20 billion EBITDA run rate by end-2022. With progress in new energy investments, a $50 billion market-cap uplift appears ahead as EBITDA trends pose upside risks," wrote analysts at Morgan Stanley in a post result note.

"Earnings growth prospects for RIL remain strong, but we remain skeptical of meaningful expansion in return ratios and/or any major moves to return cash to shareholders in view of the ‘New Energy’ investment plans. Reiterate ADD, with a target price of Rs 2,865/share (vs Rs2,960/share earlier)," wrote analysts at ICICI Securities in a recent report.

Stock outlook

At the current levels, the stock trades 10 per lower from its historic peak of Rs 2,858.15 hit on April 29, 2022. The overall sentiment on hitting a new all-time high had shown possibility of a further upside, as it had decisively crossed the earlier high of Rs 2,751.35. However, the stock fell near to the most recent reversal mark of Rs 2,521.80 as the overall market setiment turned. 

During the Covid-19 market fall, RIL had plummeted 45 per cent from Rs 1,584 to lows of Rs 861 in March 2020. Since then, the stock has gained 2.5 times and continues to attract buying momentum at lower levels. During that phase, RIL had held the support of the 200-weekly moving average (WMA) - a level it has not broken since late 2015. On the contrary, it has bounced back sharply on weekly closing basis since then.

The 200-WMA is currently placed at Rs 1,742 level, which might be 30 per cent lower from current price. That said, this remains a very strong support for the counter from a long-term perspective. 

Short-term view

From a short-term view, however, Rs 2,300 mark stands as a good support given the on-going weakness. The market participants are cautious on the overall trend of benchmark indices, which may also deter any strong move in RIL stock.  

On the upward side, the range of Rs 2,750 to Rs 2,700 becomes the hurdle territory. To see fresh buying interest, RIL stock now needs to overcome this range on good volume. 

The broader outlook continues to remain bullish above the support of 200-WMA and a positive formation of “Higher High, Higher low” on the weekly chart. One can look for the accumulation and addition at lower levels, honouring the crucial support levels.  CLICK HERE FOR THE CHART