Reliance Industries posts biggest single-day gain since Sept 2012

May 27, 2013

Reliance Industries, India’s third-biggest company by market capitalization, surged more than 5 percent on Monday, after the conglomerate and its partners said on Friday they had made a significant gas discovery in the KG-D6 block.

Niko, the Canadian oil and natural gas producer which partners with Reliance and BP, said the discovery is expected to add to gas resources in the block without revealing potential reserves.

The blue-chip stock ended with gains of 5.3 percent at 828.30 rupees, posting its biggest single-day percentage gain since Sept 14, 2012. The stock, however, is still down around 13 percent from its 2013 high hit on Jan 21.

“The outlook looks quite positive,” said R K Gupta, managing director at Taurus Mutual Fund, adding that the stock could touch 1040 rupees if it manages to cross resistance at 870 rupees.

The oil ministry moved a cabinet note last week to raise the price of natural gas produced by firms such as Reliance to $6.7 from $4.2 per million metric British thermal unit presently. An increase in gas prices will be another trigger for the stock, Gupta said.

According to Thomson Reuters data, 22 of 45 analysts covering the stock have a buy or equivalent rating, while six have a sell rating. 17 analysts have a ‘hold’ on the stock.

Goldman reiterated its ‘buy’ rating on the stock with a 12-month target price of 1,070 rupees. “If this discovery leads to a new commercial reservoir, it could meaningfully add to D6 reserves in our view,” the brokerage said.

Reliance, controlled by India’s richest man Mukesh Ambani, is widely expected to launch 4G telecom services later this year. In April, the company entered into a deal to lease undersea cable capacity from Bharti Airtel and also signed a fibre optic network-sharing agreement with younger brother Anil Ambani’s Reliance Communications.

The company, which is worth roughly $48 billion, on April 16 posted a slightly better-than-expected 32 percent rise in March-quarter net profit, helped by higher refining margins.

(You can follow Aditya on Twitter @adityayk)

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