Reliance share price extends pull back rally on second day in a row. Buy or wait?

Ashish Dhawan buys stake

The share price of Reliance Industries Ltd., or RIL, continued to rise on Wednesday. Today’s Reliance share price started out positively and eventually reached an intraday high of $2,291.45 per share on the NSE. Given that Reliance has been a large-cap stock and Sensex heavyweight since the start of 2023, the company’s share price’s Tuesday reversal from its March 2022 low caught the attention of market watchers. Despite frequent reductions in the federal government’s windfall tax, Reliance shares have fallen 11% year to date.

Stock market experts believe that this jump in Reliance’s share price today may just be a pullback rally because the stock’s chart pattern implies that it will only start to get bullish above levels of 2,350 per share. Yet, because CLSA expects Reliance shares to increase by 35% from present prices in the following year, it has issued a highly worded “buy” call to long-term investors.

Causes for Reliance Industries’ stock price decline
Santosh Meena, Head of Research at Swastika Investmart, commented on the reasons behind Reliance’s recent share price decline as follows: “The fundamental weakness in the retail and telecom sectors is exerting pressure on the company in an environment of rising interest rates. Another factor contributing to the stock’s precipitous decline is the selling by FIIs.”

Positional investors are advised to wait for additional clarity, Choice Broking’s Executive Director, Sumeet Bagadia, said: “This increase in Reliance Industries’ stock price could just be a pullback rebound from its recent lows. The chart pattern for Reliance shares indicates that the stock may only turn bullish over $2,350 per share levels. The predicted range until then is 2,175 to 2,350. So, one should hold off on starting any new purchases until the breakout over 2,350 levels on a closing basis. Those who own this company are recommended to hold it with a stop loss at levels below $2,175 per share.”

RIL’s target share price
The stock may rise by 35% over the course of the next 12 months, according to CLSA, so long-term positional investors should start buying now and continue to do so on every dip.

CLSA highlights the underlying factors that could support a rise in the price of Reliance’s shares “We think the stock has been flat over the previous 18 months due to a lack of launches and growth sectors. This may change in 2HFY24 as we anticipate the business to begin selling its portable 5G gadget (Jio Airfiber) to ramp-up wireless broadband additions and introduce its low-cost 5G smartphone as it finances the introduction of standalone 5G across all of India by the end of 2023. Recent brand launches (Independence, Campari) give us hope that Reliance’s FMCG entry would make progress in 2023.”

On the recommendation it made to long-term investors for Reliance shares, CLSA stated: “We believe there is a good likelihood of a Jio and/or retail IPO occurring within the next 12 months, given the three years since the stake sale to PE investors. Consolidated leverage should be kept under control and well below 2x EBITDA notwithstanding escalating 5G capex. BUY for a 35% increase over our TP.”

Reliance’s share price was at $2,201.60 a unit at the time CLSA released its report, and the brokerage forecast a 35% increase from $2,206.10 levels.

Disclaimer: Currency Veda does not endorse the opinions or suggestions expressed above by specific analysts or brokerage firms. Before making any financial decisions, we suggest investors to consult with licenced professionals.