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Chart check: Will the O2C biz spin-off trigger a fresh rally in RIL stock?

RIL Chairman Mukesh Ambani
Shares of Reliance Industries (RIL) rose 2 per cent in Tuesday's intra-day deals to Rs 2,048.70 on the BSE after the company said it has begun the process of carving out the O2C business into an independent subsidiary and expects to get the necessary approvals for the same by the second quarter of the next financial year.

The company said the O2C business will be turned into a separate entity that will be 100 per cent owned by RIL and will result in no change in the company's shareholding.

“With this reorganization, RIL will have four growth engines – digital, retail, new materials and new energy. While the market appreciates the value for the first two businesses, we see significant upside risk to earnings and multiples for O2C as RIL invests in new energy/technology,” notes Mayank Maheshwari, equity analyst at Morgan Stanley in a report dated February 23. READ MORE

From the technical viewpoint, Reliance's stock needs to decisively close and sustain above Rs 2,100 level to set a new trend. Until that happens, the counter is likely to see weakness on mild selling pressure. The-medium term outlook is bullish with the support of Rs 1,800 levels. A breakout above Rs 2,100 mark may see a rally in the direction of Rs 2,220 and Rs 2,390 levels.

The Moving Average Convergence Divergence (MACD) is holding on to positive sentiment with reversal nearing the zero line, which suggests that the direction ahead may be on the upward side. If the stock manages to conquer the resistance, the breakout may see added interest of market participates, as per the weekly chart.

On the other technical parameter, the Relative Strength Index (RSI) needs to cross 60 value, which has become the immediate resistance for the stock. If that happens, the stock price may see strong support from the RSI, as per the weekly chart. CLICK HERE FOR THE CHART

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