Reliance turns from Nifty’s biggest drag to its top driver

Oil-to-telecom conglomerate Reliance Industries Ltd (RIL), which was the top drag on the Nifty 50 during its steep fall from late September to early April, has become the top mover of the bellwether index's rebound.

The stock could continue its uptrend on the anticipation of growth in retail and telecom operating profits amid limited downside in the oil-to-chemicals business, according to foreign brokerages. RIL’s derivatives support this optimism.

The Mukesh Ambani-led group contributed 457 points or 10% to the Nifty's 4,534-point (17.25%) correction from a record high of 26,277.35 on 27 September last year to a 13-month low of 21,743.65 on 7 April. Since then, it has contributed 10% or 395 points to the 3.911-point (18% ) recovery till Friday's high of 25,654.2, according to wealth advisory firm Equentis.

RIL’s stock corrected 16% from ₹1,526 apiece on 27 September to ₹1,275 by end-March. The domestic institutional investors (DIIs) used this decline to hike their stakes in the counter to 19.4% as of March from 17.6% at September-end, said Equentis. Since then, the company’s shares have recovered 19% to ₹1,519 on Wednesday.

Jefferies, which as of 5 June had a buy rating on the stock and a one-year price target of ₹1,650, projects the revenue and Ebitda (earnings before interest, tax, depreciation and amortisation) of the telecom business under the Jio brand to grow at a compounded 18% and 21% rate over FY25-27.

Moreover, analysts at JP Morgan expect a limited downside to the firm's crude refining and petrochemical business.

“The unanticipated weakness in refining/petchem margins drove sharp earnings cuts in FY25, hurting stock performance, we think,” JPMorgan analysts wrote in their note dated 6 June. With a limited downside to one of Reliance's oldest and most crucial businesses, the expected growth in telecom and retail Ebitda should translate better to the consolidated bottom line this fiscal, the analysts summarized.

The brokerage increased its fiscal year 2025-26 price target to ₹1,568 last month from ₹1,530.

Nuvama Institutional Equities, in a 30 June note, ascribed the Street's highest one-year price target of ₹1,801 to the stock, driven by RIL commencing sales of heterojunction technology solar cell modules from April. These modules squeeze more electricity from sunlight.

RIL's generic stock futures support the brokers' uptrend thesis. The May and June expiries of the contract—derivatives contracts expire on the last Thursday of a month—indicate that bears consistently cut their negative bets on the counter as the price rose, a clear sign of short covering, according to Bloomberg data.

From a peak of 264,000 contracts in the April expiry, traders' open positions fell to a peak of 223,000 contracts in May and 204,000 in June expiries. The current open position has further declined to 143,000 contracts as of Wednesday (July expiry), per Bloomberg. Over this period, the price of the contract rose 30% from a low of ₹1,168 to ₹1,522 on Wednesday.

The other heavyweights to aid the Nifty recovery from 7 April low to 27 June high include HDFC Bank with a 7.6% contribution to the rally, Tata Steel (6.1%), Bharti Airtel (6%) and ICICI Bank (5.1%), per Equentis.