Golden Cross in RIL hints at 10% upside

Mumbai: A technical indicator is pointing to at least a 10% upside in shares of Reliance Industries (RIL), India’s most valued company. But many analysts are not convinced whether there is enough steam in the stock to move up further after the recent run-up ahead of the shareholders’ meeting on Thursday.RIL shares on Friday formed a Golden Cross, a technical pattern that signals bullishness. A Golden Cross forms on a chart when a stock or an index's short-term moving average crosses above its long-term average.On Friday, the stock's 50-day simple moving average stood at Rs 2,054.83, higher than its 200-day moving average of ₹2,052.79. The stock closed at ₹2,104.30 on Friday. This is the first time Reliance shares have formed the Golden Cross in 2021.Historically, the technical pattern has worked well for the stock on several occasions. When the stock formed the Golden Cross on June 11, 2020, it soared 25% from ₹1,600 to ₹2,000, said Siddarth Bhamre, director-alternative investments and research, InCred Equities. Similarly, it rose by 10.7% from ₹1,400 to ₹1,550 in October 2019 when this pattern was formed. In August 2016, the stock jumped 10% from ₹500 to ₹550.The indicator has also given a wrong signal in November and July 2015 when the stock corrected after Golden Cross was formed, said Bhamre. This time, the undercurrent is cautious.“Despite the recent correction, the trend for the stock is positive. In the short term, the stock is likely to remain in a narrow band and stay volatile,” said Bhamre.Reliance shares gained 8.4% in a month in the run up to the annual general meeting last week when the company announced its foray into new energy business and affordable smartphone launch among other announcements, which drew a mixed response from brokerages. Analysts also said there was no timeline provided for the initial public offerings of Jio and retail businesses, expectations around Saudi Aramco deal were only partially met and indicated concerns over falling petrochemical margins. The stock declined 2.3% at ₹2,104.30 on Friday — the day after the shareholder meeting.Analysts said there is a fatigue in the stock after the recent up-move.“Reliance has already priced in a lot of positives. Another capex of ₹60,000 crore to ₹80,000 crore is a dampener in the short term," said Sanjiv Bhasin, director, IIFL Securities. “The stock is reasonably priced at ₹2,200. In the long term, AGM announcements will give an ECG boost. ₹2,050-2,100 is where the stock should find support,” said Bhasin.Most top brokerages maintained their ratings and price targets on the stock after the AGM.The average target price of nine brokerage on the stock is ₹2,250, which is about 7% away from Friday’s closing price.

from Economic Times https://ift.tt/3djSZGU