Reliance Industries takes the wheel, surges 12% to steer benchmarks higher

Holding companies typically trade at a discount to the value of their underlying assets, partly because investors have limited exit options in unlisted entities. For years, Reliance Industries (RIL) was valued using the sum-of-the-parts approach. But with Jio Platforms’ listing, at least one part of the valuation puzzle has been resolved.

Reliance’s 64.5 per cent stake in Jio Platforms is now worth ₹8.37 trillion. RIL added ₹1.83 trillion to its market capitalisation on Monday, its biggest single-day increase since April 2020, following a record quarterly profit. The stock closed 11.6 per cent higher at ₹1,300, marking its biggest single-day gain since April 7, 2020, when it rose 11.94 per cent.

Ahead of the closing auction session (CAS), the stock was trading at ₹1,274.5, up 9.4 per cent. The rally had a marked effect on the Nifty 50. The index’s indicative price rose as much as 2.8 per cent during the CAS, compared with a gain of 1.2 per cent before the auction.

It settled 1.68 per cent higher at 23,440.8, while the Sensex gained 1.66 per cent to close at 75,692.78. Also Read RIL accounted for nearly half the increase in the combined market capitalisation of Nifty 50 constituents. While Reliance surged 11.6 per cent on Monday, Jio Platforms fell 0.74 per cent to ₹1,420.

“Given the market volatility currently, the Jio rally and listing gains were exceptional. Jio Platforms’ average revenue per user (Arpu) is still lagging behind Bharti Airtel’s. When it next announces a revision, it will certainly be upwards.

That will improve its Arpu figures and could trigger a short-term rally in the stock,” said Gaurav Sharma, head of research at Globe Capital. Reliance accounted for more than a fifth of all stock options contracts traded on Monday. Its November ₹1,300 call option was the most actively traded stock option in the market, with 176,350 contracts.

Its premium rose more than fivefold to ₹19.4. “This is a phenomenal move for RIL, given the stock’s underperformance in recent times. The disruption and uncertainty surrounding Russian and Saudi refineries due to the West Asia crisis and the Russia-Ukraine conflict have played out in RIL’s favour.

The inability of the US and most other refineries to process heavier crude grades, such as Venezuelan crude, benefits RIL’s position as the world’s largest grassroots refinery. Monday’s gains in RIL, one of India’s largest companies, set the tone for the sector and benefit the broader market,” Sharma said.

Open interest in the ₹1,200 call option fell 58 per cent, while its premium more than quadrupled, from ₹20 on Friday to ₹87, as call writers closed their positions. These traders had bet that Reliance’s share price would not cross ₹1,200 before the November expiry. Traders are now writing put options at strikes of ₹1,220-1,260, betting that the stock will not fall below those levels before the November 23 expiry.

Open interest in the ₹1,250 put option rose sixfold. The Nifty 50 rose 387.7 points, or 1.68 per cent, to 23,440.8, never trading below Friday’s close. The index is now 5.7 per cent above its 52-week low but remains 11.1 per cent below its high.

Advancing shares outnumbered declining ones 1,955 to 738, while the combined market capitalisation of National Stock Exchange-listed companies rose by about ₹7.7 trillion. All broad-market indices ended higher for the third consecutive session, with metal and oil and gas stocks leading the gains following the firm's results.

The Nifty Midcap 50 rose 1.24 per cent and the Nifty Midcap 100 gained 1.19 per cent. The Nifty Smallcap 250 climbed 1.37 per cent, while the Nifty Smallcap 50 advanced 0.43 per cent. “The stock has decisively broken above a prolonged downward-sloping trendline, suggesting that selling pressure may finally be giving way to fresh buying interest.

The current breakout comes at an interesting juncture, with several fundamental triggers potentially improving the investment narrative,” said Apurva Sheth, head of research at Samco Securities.