Tech check: RIL stock needs to cross Rs 2,051-mark to see fresh break out

A firm breakout above this level may see an upside towards Rs 2,200 levels

Shares of Mukesh Ambani-owned Reliance Industries skidded around 2.5 per cent to Rs 1,944 apiece on the BSE in the intra-day deals on Monday as investors booked profits in the oil-to-telecom conglomerate post its stellar March quarter earnings show.

RIL on Friday, post market hours, reported consolidated net profit of Rs 13,227 crore for Q4FY21, up 108 per cent from Rs 6,348 crore logged in the corresponding quarter last year (Q4FY20). Sequentially, the profit rose 1 per cent from Rs 13,101 crore in the December quarter (Q3FY21). Its revenue from operations rose 11 per cent to Rs 1.54 trillion as compared to Rs 1.39 trillion in the year-ago period.

Segment wise, the revenues in the dominant oil-to-chemicals (O2C) business rose 4.4 per cent to Rs 1.01 trillion in Q4FY21 from Rs 96,732 crore in the same period last year (Q4FY20).

Meanwhile, the revenues from digital services came in at Rs 22,628 crore as against Rs 19,153 crore in the same quarter last year. The revenues of the company's retail business were at Rs 41,296 crore for the quarter under review.

Going forward, analysts at HDFC Securities believe that induction of Facebook, Google, Intel and Qualcomm as partners in Jio Platforms should help the company accelerate the growth of digital connectivity and create value in the digital ecosystem through technology offerings. "Besides, recovery in refining and petchem businesses in FY22E, emergence of a clear path to a stronger balance sheet, and stake sale in the retail business bode well for the stock," they said in its result review report. The brokerage has 'Add' rating on the stock with a target price of Rs 2,285.

Those at Edelweiss Securities, however, have 'Hold' rating on the stock with a target price of Rs 2,105 per share as it opines that stake sale in retail (Reliance Retail Ventures) and telecom (Reliance Jio) have reduced their profit contribution in RIL at consolidated level which makes RIL's FAANG-like valuation (particularly RJio's) is misplaced as O2C and telecom make up 70 per cent of value.

With a 10 per cent stake sale, estimated growth in profits attributable to RIL has narrowed to 30 per cent YoY in Q4FY21 compared with 45 per cent in overall retail reported PAT in Q4FY20. Similarly for Jio, estimated growth in profit attributable dropped to 3 per cent versus standalone reported growth of 20 per cent YoY due to the 33 per cent stake sale, the brokerage noted.

"While consumer-facing businesses RJio and retail optically contribute about half of RIL's EBITDA, they contribute only 31 per cent to RIL's overall consolidated PAT. Second, quality of profit suffers as RIL's investment income of Rs 530 crore overshadows core earnings growth following cash infusions," it added.

Technical Outlook

After a sharp reversal from the lows of Rs 1,876 mark, the stock failed to conquer the 200-days moving average (DMA) recently. It has even broken the 100-DMA, placed at Rs 2,003 levels. Going forward, until the resistance of Rs 2,051 mark is not conquered, which is also its 200-DMA, market participants may not see any meaningful rally and the stock may continue to see weakness, as per the daily chart. However, a firm breakout above Rs 2,051-mark may see an upside towards Rs 2,200 levels.

Although, the Relative Strength Index (RSI) has managed to cross the resistance of 50 value, the stock has failed to build strength and cross other significant resistances. This reflects the vulnerability of stock to a negative sentiment.

The medium-term outlook has a resistance of 50-weekly moving average (WMA), currently placed at Rs 1,999-mark. Only a decisive move above this level may change the outlook towards a bullish sentiment. The next resistance stays at Rs 2,200 mark, as per the weekly chart while the immediate support stays at Rs 1,800 levels. CLICK HERE FOR THE CHART