Reliance Industries share price: The main reason for the rise in Reliance shares is America’s decision, in which Indian refineries have been given temporary permission to buy Russian oil…
highlights
- Amidst the increasing tension between America and Iran, investors are keeping an eye on the shares of companies doing oil business.
- One such stock which is attracting the attention of investors is the stock of Mukesh Ambani’s Reliance Industries Limited (RIL).
- The main reason for the rise in Reliance shares is America’s decision, in which Indian refineries have been allowed to buy Russian oil for 30 days.
After the market opened on Monday, March 9, despite the huge weakness seen in Sensex and Nifty, Reliance shares were trading strongly. Although the stock was trading on a flat note with a level of Rs 1402, it did not see any selling compared to its peers. There was a strong rise in the stock on Friday, March 6. The company’s shares jumped nearly 2.5% on the National Stock Exchange (NSE) on March 6, the biggest single-day move in the last one month.
RIL Share: Stock strengthened due to US decision
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The main reason for the rise in Reliance shares is America’s decision, in which Indian refineries have been allowed to buy Russian oil for 30 days. US Treasury Secretary Scott Besant said this temporary exemption has been given for Russian oil cargoes that have already been loaded onto ships and are stranded at sea. These cargoes have been allowed to be delivered to Indian ports by the beginning of April.
This decision comes at a time when there is increased uncertainty in the global energy market due to tensions in the Middle East and blockage in the Strait of Hormuz.
Global brokerage Morgan Stanley has reiterated its ‘overweight’ rating on Reliance Industries and has kept its target price at Rs 1,803, which means it can gain about 28 percent from the current level.
The brokerage said that refining margins remain high due to the issue in the global oil market. This is expected to support Reliance’s earnings outlook. It also noted that the company’s ability to process crude and its diversified crude sourcing strategy provide it a competitive advantage among global refiners.
Morgan Stanley further said that the chemical cycle recovery underway, supported by Reliance’s access to US ethane and internal naphtha, could further strengthen the company’s performance. According to the brokerage, FY27 earnings may grow by 6 to 8 per cent, while also noting that the stock is currently trading at a discount to its local competitors across all business verticals.
There can be benefits from the Middle East crisis
Brokerage firms believe that Reliance may benefit rather than suffer losses from the Middle East crisis. JM Financial noted that diesel crack spreads have reached $35-42 per barrel in recent days, from around $20 per barrel earlier. The yield of diesel in Reliance’s refinery is around 40-50%, which can benefit the company.
If diesel crack remains around $30 per barrel, Reliance’s GRM (gross refining margin) may increase by $4-5 per barrel.
According to analysts, every $1 per barrel increase in GRM could increase the company’s annual EBITDA by about ₹45 billion (about 2.2%) and increase share valuation by about ₹29 per share.
Support to petrochemical business also
Reliance can also get benefit in petrochemical business. The price of petrochemical products is likely to increase as the price of crude oil increases, while the company’s feedstock costs do not increase as rapidly.
Because of this, the company’s margins may improve if the price of crude oil increases.
Reliance Industries Share Price: Great movement seen in shares
Despite the Middle East crisis, Reliance shares have shown strength. The stock has risen about 5% in the last three trading sessions. Two days ago the company’s share was at around ₹ 1,345.55, which is now increasing and reaching beyond ₹ 1,400. With this growth, the market cap of the company has also increased to around Rs 18,92,042 crore.
recovery after decline
However, Reliance shares had fallen about 8% in the past month, and are still down about 3% on a month-to-month basis. But experts believe that this decline was more and now recovery is being seen in the stock.
Overall, the brokerage believes that in the current global situation, the business model of Reliance Industries can benefit, due to which the stock may see further strength in the coming time.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice in any way. ET NOW Swadesh recommends its readers and viewers to consult their financial advisors before taking any money-related decisions.
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