RIL sees sharpest intra-day gain in over 2-months; more upside likely

Jefferies maintains 'buy' rating on the stock with price target of Rs 2,580 per share.

Shares of Reliance Industries (RIL) were trading higher for the third straight day, and recorded their sharpest intra-day gain of 5 per cent in nearly two months. The stock traded at Rs 2,072.95 on the BSE in intra-day deals on Friday on heavy volumes.

Earlier, on March 3, 2021, RIL had rallied 5.4 per cent in intra-day trade and settled 4.5 per cent higher at Rs 2,201.35. The stock hit a record high of Rs 2,368.80 on September 16, 2020.

At 11:59 am; RIL was up 4.4 per cent at Rs 2,065 on the BSE, as compared to 0.50 per cent rise in the S&P BSE Sensex. The trading volume more-than-doubled with a combined 13.06 million shares changing hands on the NSE and BSE. RIL was the top gainer among the benchmark indices, S&P BSE Sensex and Nifty50.

The stock, both fundamentally and technically, looks on a firm footing. Analysts at Jefferies maintaine their 'buy' rating on the counter with a target of Rs 2,580 per share. Polymer spreads, they believe, are at decade-high levels on strong downstream demand. "Buoyed by polymers that comprise 45 per cent of its petchem portfolio, RIL's portfolio level spread is nearing its decade high and is 30 per cent ahead of our estimate for FY22E," their analysts said.

"RIL's petchem segment earnings before interest, taxes, depreciation adn amortisation (Ebitda) could be 50 per cent ahead of our estimate on operating leverage benefits if the current spreads were to sustain over FY22E. This could drive 14 per cent upside to our consolidated Ebitda estimate. “At the current stock price, valuing the energy business at long-term average multiples, we are left with Rs 1,150/share as imputed value of RIL’s stake in Jio and Retail. This is in line with the valuation offered by PE funds that bought stakes in Jio and Retail in Q1FY21. In our view, sustained strong petrochemical performance improves the likelihood of O2C stake sale in FY22,” Jefferies said in report dated May 28.

Technically, too, the stock appears to be headed higher over the medium-term and can easily scale past Rs 2,200 levels - an upside of around 7 per cent from the current levels. CLICK HERE FOR THE CHART

This counter, according to charts, needs to firmly close above the resistance of Rs 2,050 mark with strong volumes. When that happens, the breakout may result in an upside towards Rs 2,110 and then Rs 2,150 levels. The surge of nearly 5 per cent on April 28 shows an upside bias with the Moving Average Convergence Divergence (MACD) also supportive of the upward direction, as per the daily chart.

From a medium-term perspective, close above Rs 2,050 levels may take the stock towards Rs 2,200 levels. The weekly Relative Strength Index (RSI) shows a support of 40 value, which the counter held during the recent corrective moves, weekly chart suggests. The overall trend indicates a firm support at Rs 1,950 levels.