Reliance Industries Limited (RIL), India’s largest conglomerate, operates across diverse sectors, including Oil & Gas, Petrochemicals, Retail, Telecom (Jio), and Digital Services. This blog post delves into Reliance’s quarterly performance, balance sheet strength, and growth outlook to highlight why it remains a compelling long-term investment option.
Strong Financial Performance:
Reliance's
revenue for March 2024 soared to an impressive ₹236,533 Cr, demonstrating
robust top-line growth. On a trailing twelve-month (TTM) basis, the company's
sales stand at ₹924,938 Cr, reflecting consistent momentum over the past year.
Profitability remains at the core of
Reliance’s business:
Operating
Profit grew significantly from ₹26,020 Cr in September 2021 to ₹42,516 Cr in
March 2024.
Operating
margins have been steady in the 17%-18% range, underscoring excellent cost
efficiency and operational management.
Net
Profit stood at a solid ₹21,243 Cr in March 2024, showcasing resilience despite
market challenges.
Earnings
Per Share (EPS) improved to ₹14.01, signalling strong returns for shareholders
and enhanced investor confidence.
A Strong Balance Sheet: Financial
Stability and Growth:
Reliance's
balance sheet highlights its financial discipline and sustainability focus
Reserves
surged to ₹812,687 Cr as of September 2024, ensuring financial stability.
Significant
investments in fixed assets and capital work in progress (CWIP) reflect ongoing
expansion and infrastructure development to fuel future growth.
While
borrowings stand at ₹357,525 Cr, they remain manageable relative to asset
growth and operational strength.
Despite its solid foundation, Reliance experienced a Net Profit dip to ₹17,445 Cr in June 2024, likely due to cyclicality or sector-specific headwinds. Additionally, fluctuations in tax rates (ranging from 11% to 28%) have created variability in net profit margins.
The
chart of Reliance Industries Ltd. (RIL) showcases a clear long-term price
structure adhering to Elliott Wave Theory. Here's a detailed explanation of the
chart using wave principles.
The
chart of Reliance Industries Ltd. (RIL) showcases a long-term price structure
that adheres to the Elliott Wave Theory. The analysis breaks down the chart into
impulsive waves (1, 2, 3, 4, 5) and corrective phases (A-B-C), illustrating the
progression of price action.
The
first major rally (Wave 1 in Black) began in the late 1990s and peaked around
2007. This wave reflects a strong bullish move driven by fundamental and market
optimism. Wave 1 in Black, marks the initial thrust upward, setting the tone
for a long-term uptrend.
From
2008 to 2015, Reliance entered a prolonged contracting triangle consolidation. The
triangle is labelled a-b-c-d-e, forming the corrective Wave 2 (Black).
Triangles
are common in Elliott Wave corrections and typically occur during Wave 2 or
Wave 4. This pattern reflects a pause in the overall uptrend, with price action
narrowing as buyers and sellers reach equilibrium.
In
the chart, we observe a third black wave, which is an impulsive wave that
contains green sub-waves (i, ii, iii, etc.). The 1st wave within the green
sub-waves is identified as a leading diagonal. Let’s break it down:
The
third wave (black) represents the strongest impulsive phase, characteristic of
a trending market. Elliott Wave Theory states that Wave 3 is usually the
longest and strongest wave of the 5-wave sequence. Within this larger black
Wave 3, we can see a clear subdivision into smaller green impulsive waves.
The
black 3rd wave is made up of five smaller waves (green), where Wave (i) green
is the leading diagonal, a special pattern in Elliott Wave Theory. Wave (ii)
green, a corrective phase that retraces a portion of Wave (i). Following this,
Wave (iii), (iv), and (v) complete the green sub-wave impulsive structure.
Green
wave (i), unlike typical impulsive waves (which have clear straight 5 waves), a
leading diagonal forms a wedge-like pattern where the price moves in overlapping
5 sub-waves labelled A-B-C-D-E. This diagonal in the chart shows converging
trendlines, where A to E represents the 5 internal sub-waves. Each sub-wave
overlaps with the prior wave, which is typical of a leading diagonal.
This
chart illustrates the Elliott Wave progression in Reliance Industries, marking
the completion of the green cycle within the larger black third wave.
The
green sub-waves (i)-(v) form an impulsive structure culminating in the peak of
Wave ③ (black).
Following
this, the black complex fifth wave developed. The overall cycle reflects an
extended five-wave progression, where the price completes a significant
impulsive rally, followed by consolidation, signalling the end of the black
fifth wave and larger Elliott Wave cycle.
In
this chart, the 5th wave (black) appears to be forming an ending diagonal,
which is characterised by converging trendlines and overlapping waves.
Currently, sub-waves (a), (b), (c), and (d) are visible, but the (e) leg is yet
to be completed. This indicates that the diagonal structure is still in
progress.
As
per Elliott Wave Theory, the (e) leg is expected to move higher but should
remain within the boundaries of the converging trendlines. Once the (e) leg
completes, it would mark the end of the 5th wave and the larger impulsive
structure. Following this, a significant reversal or corrective phase is
likely, leading to a new ABC corrective pattern or the start of a larger-degree
correction.
In
this chart, the Elliott Wave analysis demonstrates the final stages of a 5th
wave (black) as an ending diagonal. As per Elliott Wave Theory, the (e) leg is
expected to move higher but should remain within the boundaries of the
converging trendlines. Once the (e) leg completes, it would mark the end of the
5th wave and the larger impulsive structure.
Following
this, the market is expected to undergo a strong reversal. This is because
ending diagonals often signal the exhaustion of the prevailing trend. The
reversal may lead to a sharp corrective phase, likely forming a larger ABC
correction or a more complex structure.
As
seen in the chart, after completing the (e) leg, a strong downward move is
depicted. This aligns with the expectation that the price will break out of the
diagonal's lower boundary.
The
corrective phase could potentially retrace towards lower levels, targeting
significant support zones, as shown in the chart, possibly near 900 or below.
In the short term, a potential rally of approximately 30% is anticipated
within the (e) leg, offering short-term trading opportunities. In the medium
term, once the diagonal is complete, a trend reversal accompanied by a sharp
decline is expected.
Disclaimer: I am not
a SEBI-registered financial advisor. The information shared is for educational
purposes only and should not be considered financial advice. Investors are
advised to conduct thorough research before making any investment decisions.