Before the oil-to-telecom giant’s meeting on bonus shares on September 5, JM Financial predicted in a technical note that Reliance Industries Ltd. (RIL) will likely beat Nifty in the future.
“The RIL stock has been developing a pattern of higher top higher bottom, a bullish formation, following the drop from highs of Rs 3,218 level. It has begun trading above both its major short- and long-term moving averages, indicating that more strength is likely to emerge, according to JM Financial. According to the domestic broking, every significant RIL sale that occurred over the previous ten months ended just below the 100-day EMA line, which is now at Rs 2,958. The share was trading unchanged at Rs 3,033 on Tuesday.
Starting with a total future open interest of 48.7 million shares, the September F&O series differed from the previous three series’ average of 40 million shares. According to JM Financial, the majority of accumulation appears to be on the long side, indicating that bullish views are dominating the counter. As of now, Reliance Industries’ stock has lagged the Nifty by 8% every quarter. Mutual funds have a lower weight in the stock than the NSE200.
The ratio of RELIANCE to NIFTY (now at 0.1205 levels) is trading closer to the post-COVID-19 lows of 0.1159 level. Over the last four years, it has found support on many times in the region of 0.1159-0.12 levels, indicating a decreased likelihood of a breakdown. The ratio is trading at 0.8 standard deviations below the mean values of 0.1294 over a 4-year data frame. It is at the 15 percentile, according to JM Financial.
The firm announced on the day of its 47th AGM that the board will convene on Thursday, September 5, to deliberate and propose to the shareholders, for their approval, the issuance of bonus shares in a 1:1 ratio. This announcement recently put the stock in the headlines. Although RIL did not reveal any plans to sell Reliance Jio Infocomm or Reliance Retail Ventures Ltd. at its AGM, experts were impressed by the company’s clear path for the new energy industry.
“Our best choice is RIL. We anticipate that Jio (recent telecom pricing rises, 5G deployment, and ramp-up of home internet) and retail (rapid growth in retail, spurred by market share gains and new commerce) will continue to provide significant earnings traction. Given the promising business outlook and the potential for value unlocking from the retail, digital, and financial services portfolios, we firmly think that this is a compelling long-term investment bet that will increase shareholders’ returns in the years to come,” Sharekhan stated.
