Reliance Industries Stock Rises 3% Following Citi's Upgrade to 'Buy'

Shares of Reliance Industries surged by up to 3% on November 25 after Citigroup analysts upgraded their rating for the stock to "buy" and raised the price target to ₹1,530. This adjustment suggests a 21% upside from Friday’s closing price. Citi highlighted that the risk-reward profile for the stock has improved, driven by several favorable factors.

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At 10:00 a.m. IST, Reliance Industries was among the top gainers on the Nifty 50, trading at ₹1,295 on the NSE.

Key Drivers of Citi's Upgrade:

Refining Margins: The brokerage expects an uptick in refining margins, attributing this to a decline in China’s export competitiveness.

Telecom Division (Jio): Jio is well-positioned to benefit from potential tariff hikes, higher data pricing, and monetization opportunities related to its 5G rollout.

Retail Segment: While Citi acknowledged that softness in Reliance’s retail vertical may persist for a few quarters, it remains optimistic about the long-term growth potential of the company’s diversified businesses.

Reliance reported a 9.4% sequential growth in net profit for Q2 FY24, reaching ₹16,563 crore, driven by strong performances in its telecom and retail businesses. Revenue from operations for the quarter stood at ₹2.35 lakh crore, marginally lower than the ₹2.36 lakh crore in the previous quarter.

Stock Performance:

The stock rebounded from a 20% correction from its recent peak, rallying 3.5% on Friday. This contributed approximately 70 points to the Nifty’s 550-point gain. Citi’s revised price target underscores the potential for further upside.

Sector-Specific Insights:

Telecom: Future tariff hikes and strategies to improve data pricing and monetize 5G are expected to bolster Jio’s performance.

Retail: Despite anticipated short-term weakness, the retail vertical’s long-term outlook remains robust.

Energy Business: Citi foresees improved refining margins, with China’s reduced export competitiveness serving as a significant catalyst.

Broader Analyst Sentiment:

Out of 38 analysts covering Reliance Industries, 32 rate the stock as a "buy," while three each recommend "hold" and "sell." CLSA, another leading brokerage, recently projected a 30% upside, highlighting catalysts expected in 2025, including the valuation of Reliance’s solar business at $30 billion and its overall new energy division at $43 billion.

Citi also noted a minor anticipated adjustment to Reliance’s consolidated EBITDA estimates (a 1% average cut) for FY25–27 due to the retail segment’s softness. Despite this, the long-term outlook remains positive, supported by strong fundamentals across its business verticals.