Reliance stock reaches 52-week high: Know factors driving the rally
What's the story
The shares of Reliance Industries, India's largest conglomerate, hit a new 52-week high on the BSE in Monday's trade.
The shares jumped 4.5% to Rs. 2,755 per share. The strong buying interest was generated after the oil-to-telecom giant announced the demerger of Reliance Strategic Investments Limited (RSIL), its financial services arm.
It will rename and list RSIL as Jio Financial Services Limited (JFSL).
Jump
Reliance's stock fell to a 52-week low in March 2023
On BSE, Reliance's shares opened at Rs. 2,686 apiece and saw upward movement from the beginning.
The stock broke the 52-week high on NSE as well, hitting Rs. 2,756 per share.
Interestingly, this is a comeback of sorts for the large-cap stock, which fell to a 52-week low of Rs. 2,180 on March 20, 2023.
Demerger
Reliance shareholders will get one share of JFSL
The chief driver of Reliance's climb today seems to be the announcement about JFSL.
The new company will unlock value for Reliances's shareholders, with each shareholder getting one share of the new firm for every share they hold in the parent company.
The new company's shares will be allotted on July 20. The rush to buy Reliance shares can be attributed to that.
JFSL
JFSL has underlying net worth of Rs. 1.5 lakh crore
Post demerger, JFSL will be the fifth largest financial services firm in terms of market capitalization. It will compete with the likes of Paytm and Bajaj Finance.
The company is starting with a net worth of Rs. 1.5 lakh crore, out of which Rs. 1.1 lakh crore is its shares in Reliance.
Therefore, it would have a headstart compared to its peers.
The company
Isha Ambani will be a non-executive director of JFSL
RSIL's board appointed Hitesh Kumar Sethia as the MD and CEO of JFSL for a period of three years in a meeting on July 8.
Isha Ambani and Anshuman Thakur will be non-executive directors of the new entity.
The company will have former Union Home Secretary Rajiv Mehrishi, renowned CA Bimal Manu Tannu, and Punjab National Bank's former CEO Sunil Mehta as independent directors.
Potential
JFSL's primary focus will be merchant and retail lending
Reliance plans to capture India's booming finance sector with JFSL. As per the company, it will utilize the presence of Reliance consumer business across the country to deliver financial products digitally.
JFSL's initial focus will be on retail and merchant lending. It will also incubate other financial service verticals, including insurance, payments, digital brokering, and asset management.
Rally
Reliance's shares have been rallying for 3 months
Reliance's stocks have been rallying over the past three months. During this time, its shares jumped 16.5% compared to a 9.3% rise in the BSE benchmark.
This calendar year, Reliance's shares climbed 7.15% against BSE's 7.5%. In a month, the company added 10% compared to Sensex's 4.4%.
Out of 31 analysts, 26 recommend buying the stock.
Information
Reliance's shares closed nearly 4% up today
After a successful trading day, Reliance Industries' shares closed at Rs. 2,735.15 on the BSE, up by 3.78%. On the NSE, the shares climbed by 3.86% or 101.65 points to end at Rs. 2,735.25.
Overview
Benchmark indices hit new record highs last week
Reliance's success on the exchanges mimics the general market. The past few weeks have seen the market breaking the shackles of the IT sector's drag.
On July 6, BSE touched an all-time closing high of 65,785.64, while NSE ended a record-high of 19,497.30.
The continued buying activity of foreign institutional investors, strong corporate earnings, and steady monsoon have lifted investor sentiments.
IPO
There have been multiple successful IPO listings as well
The change in investor sentiments can be seen in the IPO activity as well. Since the turn of June, there have been 11 new listings.
Out of them, 10 opened at a price higher than the issue price. A few of them had bumper listings.
Drone-maker IdeaForge debuted at a premium of 94.21%, while Cyient DLM was listed at over 50% premium.