Reliance share price jumps 3%; experts see Russia-Ukraine war connect

Reliance share price: Extending its rally for the second consecutive session, Reliance Industries (RIL) share price saw strong buying interest during the early morning trade on Monday, November 25. Reliance share price saw a gap-up start and hit an intraday high of ₹1,304.45 on the NSE, marking a gain of around 3 per cent. 

According to market experts, this rally can be attributed to the expected margin benefit for the major oil companies, including RIL, after the escalation in the Russia-Ukraine war. Further, an upgrade by global brokerage Citi aided buying in the Sensex heavyweight stock on Monday morning.

Soaring oil prices to aid margins

Experts believe that the ongoing Russia-Ukraine conflict will benefit oil-producing companies, including Reliance, as rising crude oil prices are expected to boost the margins and drive up the company's share price.

Mahesh M Ojha, AVP—Research at Hensex Securities, said, “Due to escalation in the Russia-Ukraine war, crude oil prices are skyrocketing, and the trend is expected to continue until there is some ease in the geopolitical tension. So, Reliance and other oilmaker companies are expected to reap margin benefits on their buffer stocks, which is expected to cement their upcoming quarter numbers."

Apart from this, the company's retail and telecom business is expected to sustain its uptrend, he added. "So, Friday's rally in Reliance share price should be seen from this angle. Those with surplus money may think of looking at Reliance shares, as the stock looks promising for all sets of time horizons,” he further added.

Experts anticipate the uptrend in Reliance's stock price to continue, with shares potentially reaching the 50-day exponential moving average (50-DEMA) level of around ₹1,350. A breakout above this 50-DEMA could signal a bullish trend, supported by the strong performance of its retail and telecom businesses in the medium to long term.

Shifting trends

Last week, brokerages Morgan Stanley and JPMorgan reaffirmed their "overweight" ratings on Reliance Industries, citing improvements in refining margins. 

JPMorgan identified two key factors behind Reliance Industries' recent underperformance: weak refining margins and lower sales growth in its retail segment - However, the brokerage notes that these trends are now beginning to reverse. Morgan Stanley echoed this perspective, highlighting that refining margins are starting to recover after two challenging quarters.

On the global front, approximately 600,000 barrels per day of refining capacity is expected to be shut down in 2025, which Morgan Stanley believes will lead to tighter global supply and improving margins. This, in turn, is expected to boost Reliance Industries' free cash flow generation.

Morgan Stanley reiterated its target price of ₹1,662 per share, suggesting an upside potential of approximately 36%, while JPMorgan set a target price of ₹1,468 per share for Reliance Industries.

Citi's bullish outlook on RIL

Citi joined a list of global brokerage firms that recently reaffirmed their bullish outlook on Reliance Industries. In its latest report, Citi upgraded its rating on the stock to 'Buy' and raised its target price to ₹1,530 per share.

After a period of significant underperformance, where RIL lagged the broader Indian market by 20% over the last six months, Citi believes the risk/reward outlook has turned favourable. The brokerage expects an improvement in refining margins, driven by China’s reduced export competitiveness.

Jio is also well-positioned to benefit from not just future tariff hikes but also potential moves to improve data pricing and better monetize its 5G services. However, retail softness may persist for another couple of quarters, leading Citi to pare its estimates for the segment.

Meanwhile, CLSA has also maintained its ‘outperform’ rating on the stock, with a target price of ₹1,650 per share. The brokerage highlights Reliance Industries' new energy business, valued at $40 billion, which it believes is being overlooked by the market.

Following this development, shares of the Mukesh Ambani-led company surged 3% to ₹1,302 per share in early morning trade on November 25, extending their winning streak for the second consecutive session. Today’s rise also pushed the stock to a two-week high. The heavyweight stock continues to contribute to the market's upward movement.

Disclaimer: The views and recommendations given in this article are those of individual analysts. These do not represent the views of Mint. We advise investors to check with certified experts before taking any investment decisions.