India's Reliance posts best day in over six years as oil business, Jio Platforms lift outlook

Reliance Industries saw its shares soar by 11.6% on Monday, marking its best performance in over six and a half years. This gain was driven by a stronger-than-anticipated quarterly performance, which has led to optimism about the potential for future earnings growth. Despite challenges in the retail sector, the company reported a remarkable 40.6% surge in net profit for the September quarter, reaching 255.48 billion rupees ($2.69 billion), surpassing the analysts' forecast of 214.19 billion rupees.

This remarkable growth was primarily fueled by improved margins in its oil-to-chemicals (O2C) and telecom businesses. The results demonstrated the growing earnings contribution from these sectors, while also providing better insight into newer growth areas like energy. However, analysts noted that retail profitability remained under pressure.

Reliance's stock surged to its session high, becoming the top gainers on the Nifty 50, which saw a 1.7% increase. The positive earnings growth was a welcome relief for the conglomerate, whose shares have declined by more than 17% this year, marking what is expected to be their worst annual performance since 2011. In contrast, the Nifty has decreased by 10.3% year-to-date.

Mukesh Ambani's Reliance is now welcomed by the competition from Starlink, as reported in its first response to Elon Musk. The market's acceptance of the results was evident in the stock's movement, and the gains also came after Reliance's shares had been trading near the lower limit, making the current valuations more attractive.

Deven Choksey, a managing director of DRChoksey Finserv, mentioned that the market had welcomed the results well, reflecting in the stock's movement. Furthermore, the gains occurred as Reliance's shares had been trading around the lower limit, making the current valuations more comfortable. Jefferies raised its earnings forecasts, stating that O2C had hit the bullseye, thanks to record crude processing, nimble sourcing, and a shift towards higher-value fuel exports.

Emkay Global attributed the earnings beat to a sharp recovery in O2C and stronger profitability at Jio Platforms. Macquarie described the quarter as a "record O2C surge" and emphasized continued subscriber additions and margin expansion at Jio Platforms. Citi noted that the strong results could support Reliance's stock in the near term, although sustained outperformance would likely require a recovery in retail profitability and better visibility on monetization from new energy investments.