On January 29, Reliance Industries Ltd. (RIL), managed by Mukesh Ambani, was the only entity responsible for the 38 percent increase in the Nifty 50 market capitalization. In addition to the solid fundamentals, analysts ascribed the increase to foreign funds hedging their short bets in the index by moving to Reliance Industries.
On January 29, RIL’s market value rose by almost Rs 1.29 Lakh billion. At Rs 2,905, the stock reached a new all-time high, increasing the market capitalization to Rs 19.5 Lakh Crore.
Together, the following five stocks—ONGC, Adani Enterprises, Larsen & Toubro, HDFC Bank, and Coal India—added more than 26% to the increase in value.
On January 29, the benchmarks Sensex and Nifty both saw increases of more than 1.7 percent. Nifty’s market capitalization increased by Rs 3.35 lakh crore to Rs 173.3 lakh crore from Rs 169.95 lakh crore on January 25.
Reliance’s sudden jump is noteworthy, according to Kotak Securities’ Shrikant Chouhan. This is a rare event. “Such moves usually follow when there are numerous short positions in the overall market, and FIIs look for strong stocks to hedge their positions,” he stated.
He noted that equities such as HDFC Bank, Bajaj Finance, and Infosys had already shown this trend.
Based on the derivatives data, FIIs rolled over their short bets in the index futures last week, with net short contracts exceeding 1.08 lakh contracts and short positions at 78 percent, according to Ruchit Jain, Lead Research, 5paisa.com.
“These positions are seen as short heavy and such short heavy positions around the support usually leads to a short covering move,” he stated.
Furthermore, because higher refining margins are a result of Brent crude’s strength, other refiners including HPCL and BPCL also had strong performance on January 29.
“After Q3 results, brokerages had revised RIL target price to Rs 2,900 levels, making Reliance an attractive option for FIIs looking to hedge short positions, especially as it was 10 percent below its fair value,” said Chouhan.
The recent increase in Singapore GRMs, or gross refining margins, according to independent analyst Prakash Diwan, also suggests a favorable future for RIL’s O2C sector.
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