Reliance Infra shares have reached the upper circuit limit of 20%, trading at Rs 282.75. This remarkable surge comes after the stock has recorded a 34.23% gain during the calendar year 2024. The increase marks the third consecutive session of growth for the company, reflecting investor optimism and positive market sentiment.
Key Developments Driving the Surge
The sharp rise in Reliance Infra’s share price is largely attributed to the company’s recent announcement regarding a significant reduction in its standalone external debt. The firm reported that it has successfully reduced its external debt from Rs 3,831 crore to a mere Rs 475 crore. This substantial debt reduction follows the novation of certain charged securities by Invent Assets Securitisation and Reconstruction Pvt Ltd, one of the company’s lenders. As a result, the entire fund-based outstanding amount owed to Invent ARC has been wiped out.
In addition, Reliance Infra has settled its dues with other key lenders, including the Life Insurance Corporation of India, Edelweiss Asset Reconstruction Company Ltd, ICICI Bank, and Union Bank. With the external debt liability now down to Rs 475 crore, the company’s net worth is projected to stand at Rs 9,041 crore.
Technical Analysis
From a technical perspective, Reliance Infra’s stock is performing well above several key moving averages, including the 5-day, 10-day, 20-day, 30-day, 50-day, 100-day, 150-day, and 200-day simple moving averages (SMAs). The stock’s 14-day relative strength index (RSI) is currently at 76.72, indicating that it may be overbought, as an RSI above 70 is generally seen as a signal of overbought conditions.
According to the latest BSE data, Reliance Infra has a negative price-to-equity (P/E) ratio of 5.89 and a price-to-book (P/B) value of 1.48. The earnings per share (EPS) is at (-)40.04, and the return on equity is reported at (-)25.15.
Analyst Recommendations
Several analysts have weighed in on the stock’s potential trajectory. Ravi Singh, Senior Vice-President of Retail Research at Religare Broking, noted that the stock could target an upside of Rs 290 in the near term. He advises traders to maintain a strict stop-loss at Rs 270 to mitigate risks.
Jigar S Patel, Senior Manager – Technical Research Analyst at Anand Rathi, stated that the support level is at Rs 265, while resistance is identified at Rs 308. He emphasized that a decisive close above Rs 308 could lead to further upside, potentially reaching Rs 320. He predicts the expected trading range for the short term to be between Rs 255 and Rs 320.
On the other hand, Sebi-registered research analyst AR Ramachandran cautioned that while the stock price appears bullish, it is also showing signs of being overbought on daily charts. He highlighted the next resistance level at Rs 331 and recommended that investors begin to book profits. He warned that if the stock closes below the support level of Rs 247, it could lead to a downward target of Rs 195 in the near term.
Business Overview
Reliance Infrastructure is engaged in various sectors, including engineering, procurement, and construction (EPC) services, power distribution in Delhi, and the operation and maintenance of infrastructure projects such as metro systems, toll roads, and airports. The company has also been involved in executing significant projects like the Mumbai Metro Line One. As of June 2024, the promoters hold a 16.50% stake in the company, reflecting ongoing confidence in its strategic direction.
In summary, the recent surge in Reliance Infra shares has been driven by substantial debt reduction and positive analyst sentiment. However, investors are advised to remain cautious and consider technical indicators when making trading decisions. The coming weeks will be pivotal in determining whether the stock can maintain its upward trajectory.