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Reliance rally puts historical one-year return pattern in focus
Reliance rally puts historical one-year return pattern in focus
Reliance Industries (RIL) share price soared 11. 6 per cent to ₹1,299 on Monday, registering its biggest single-day gain in over six years on the BSE and NSE.
Reliance Industries (RIL) share price soared 11.6 per cent to ₹1,299 on Monday, registering its biggest single-day gain in over six years on the BSE and NSE. as reported by historical data, RIL stock rallied 11.9 per cent on April 7, 2020. The stock single-handedly contributed around 50 per cent of the day's gain on the Nifty. RIL added ₹1.83 trillion in market capitalisation after the Mukesh Ambani-group behemoth reported high double-digit growth in consolidated and standalone net profit and revenue in the September quarter.
Post Q2 earnings, brokerages expect the stock to re-rate and maintain a positive outlook on the company. Analysts have pegged an upside target of up to ₹1,710 on RIL stock. READ MORE Here's what RIL's share price history suggests Apurva Sheth, Head of Market Perspectives and Research at SAMCO Securities, analysed RIL's 26-year stock price data to identify possible stock behaviour after such a strong rally.
as reported by the analysis, Sheth notes that RIL stock has rallied over 5 per cent on 9 occasions in a single trading session. The analyst flags that the average 1-year forward return after such rallies stands at an astounding 55.3 per cent gain. The win rate in such scenarios is 100 per cent, meaning the stock has delivered a positive return over the next 1-year after rallying over 5 per cent in a single day in the last 26 years.
Apurva Sheth points out that RIL on Monday advanced sharply 11.6 per cent in a single session, accompanied by an extraordinary volume breakout. "RIL stock has decisively broken above a prolonged downward sloping trendline, suggesting that selling pressure may finally be giving way to fresh buying interest," explains Sheth.
The current breakout comes at an interesting juncture, with several fundamental triggers potentially improving the investment narrative, the analyst adds. The biggest catalyst for RIL stock as reported by the analyst is the success of Jio Platforms IPO and its listing last week, which unlocks value through a separate market valuation of Reliance's digital business.
The September quarter results have added further momentum. Reliance reported record consolidated EBITDA of ₹62,409 crore, up 23.9 per cent YoY, and record PAT of ₹29,550 crore, up 33.8 per cent. The O2C business delivered a particularly strong performance, with EBITDA rising 67.9 per cent, while Jio's EBITDA grew 16.6 per cent. The confluence of a technical breakout, exceptional volumes, improving earnings and value unlocking through Jio makes Reliance an interesting stock to watch, says Sheth.
Historically, the best 1-year forward return was a 170.5 per cent rally in RIL stock following an over 5 per cent single-day surge on June 20, 2005. The next two best performances followed breakout rallies on February 22, 2017 and August 13, 2019, yielding gains of 88.3 per cent and 75.4 per cent, respectively, the study said. Only thrice out of the nine occasions, RIL stock delivered a single-digit return over the next year after a breakout. The least gain stood at 4.3 per cent after a breakout on September 10, 2020, stated the note from SAMCO Securities.
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