RIL falls over 3%: most negatives priced in, GRMs still a concern

The Mukesh Ambani-led conglomerate on Friday reported a 46.3% rise in consolidated net profit to ₹17,955 crore.

Analysts said the stock, which has been hit by worries around the windfall tax on diesel and gasoline exports recently, has priced in most of the negatives and valuations are attractive though a runaway rally is unlikely soon.

“The GRMs had scaled down and the windfall tax was imposed and then cut — these factors have weighed on the stock recently. In the first quarter performance there was a miss of about 6-7% at the operating level,” said Hemang Jani, head of equity strategy, broking & distribution at

.

“The trend of GRMs continues to be down and it will be an overhang on the stock. If one has a medium- to long-term perspective, she can look at the stock as many of these negatives are already priced in.”

The drop in shares of

and IT major due to weaker than expected quarterly earnings weighed down benchmark indices. The Sensex ended down 306 points, or 0.55%, at 55,766 and the Nifty closed down 88.45 points, or 0.53%, at 16,631.
Analysts see ₹2,380-₹2,400 as crucial levels for Reliance shares on the technical charts.

“Long positions are still intact and if these levels are held there may be a pullback action till ₹2,540; but if these are not respected then these bullish positions are likely to get liquidated,” said Rajesh Palviya, head-technicals and derivatives, Axis Securities.

Brokerages largely maintained bullish rating on

although some did cut earnings estimates.

“The rising focus on 5G readiness, the end of Jio’s subscriber consolidation, continued momentum in retail expansion, progress in omni-channel and the private label contribution were the key operational positives. Reliance offers some of the strongest earnings growth in India’s large-cap space,” said CLSA while retaining a ‘buy’ with a target price of ₹2,955.

maintained a ‘buy’ rating while trimmed target price to ₹2,950 from ₹3,000. The brokerage said it has cut FY23 and FY24 profit estimates by 4.3% and 0.6%, respectively, to factor in the normalization of the tax rate to around 25% and moderation in gross refining margin estimate.

Kotak Institutional Equities has also maintained a ‘buy’ rating on Reliance Industries and cut target price to ₹2,980 from ₹3,050. Similarly, YES Securities has retained ‘add’ and lowered target price to ₹2,755 from ₹2,840. JP Morgan has maintained an ‘overweight’ rating with a target price of ₹3,170.