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Is RIL's dream run at the bourses over? Check what technical charts suggest

Mukesh Ambani. Photo: Bloomberg
Shares of Reliance Industries (RIL) slipped over 5 per cent on Monday morning to Rs 1,948 levels - its three-month low - reacting to the September 2020 quarter numbers released post market hours on Friday. Its partly paid (PP) shares, too, were quoting nearly 10 per cent lower and hit a low of Rs 1068.10 in intra-day deals on the BSE.

From a low of around Rs 875 levels hit in March 2020, the stock made a 52-week high of Rs 2,368.80, buoyed by the company's strategy of raising capital for its telecom venture from marquee global investors, Jio Platforms, and becoming debt-free in the process.

Over the past few sessions, however, the stock has been range-bound and has not been able to stick at higher levels. So, is the dream run over or the rally has more steam left? Here's what charts say.

Technical view

The sentimental level of Rs 2,000 mark is crucial for the road ahead for this stock and will pave the way for the near-trm sentiment. As of now, RIL has been trading in a narrow range amid buy and sell trades.

The Relative Strength Index (RSI) has entered the oversold condition, which is signifying diminishing selling pressure. And this scenario may see a rebound if the stock continues to trade and hold ground around the Rs 2,000 mark on good volume. In such a scenario, expect more consolidation.

From a medium-term perspective, the stock has broken its 50-day moving average (DMA) and 100-DMA, effectively suggesting weakness towards the next support of 200-DMA placed at Rs 1,700 levels, as per the moving averages on the daily chart. That said, RIL has not yet shown any major sharp decline in intraday sessions that can trigger a sharp downside. The recent fall has been met wtih accumulation at lower levels. CLICK HERE FOR THE CHART

Overall, the trend remains mildly weak though not on high volumes. Investors now seem to be in a 'wait and watch' mode and fresh triggers to buy for the long-term.

Fundamental view

At the fundamental level, analysts say the markets will keep a tab on the company's performance in the September 2020 quarter, progress in the Future Group deal, any tariff hike in the telecom business, and a further stake sale in the oil and chemical business. 

In the telecom business, revenue growth of 36 per cent was led by a steady uptick in subscribers and a jump in the average revenue per user (ARPU). READ ABOUT IT HERE

"We use a sum-of-the-parts methodology to value RIL's different businesses. For its core refining/petchem businesses, we use 7x/8x average of FY22-23F EV/EBITDA. We use DCF to value the E&P business. We value R-Jio at 11x avg FY22-23F EV/EBITDA. We value Reliance Retail at 27x avg FY22-23F blended EV/EBITDA. Our target price is Rs 2,450. The benchmark index for this stock is Nifty 50," wrote analysts at Nomura in an October 31 note.

The stock, according to an IIFL note, trades near the base-case SoTP; seamless ramp up in Retail, JIO and stake sale in O2C can drive a bull case valuation of Rs 2,567/share in coming 12-18 months. The brokerage has maintained a BUY rating on the stock.

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