Published on: March 18, 2024
While trading, investing in the stock that takes centre stage is always recommendable. Amidst the hustle and bustle in the markets, certain giants stand out, casting a long shadow over the entire scene. One such behemoth in the Indian stock market is Reliance Industries Limited.
As we analyse the Reliance stock price trend, we will go through a couple of ratio charts.
Ratio charts provide insights into the relative performance of specific stocks or sectors compared to broader market indices such as the Nifty50.
A ratio chart depicts the relationship between two variables, typically expressed as a ratio. In the context of stock market analysis, it represents the performance of one asset relative to another. For instance, the ratio chart of Reliance/Nifty50 compares the performance of Reliance stock to that of the broader Nifty50 index.
Reliance/Nifty50 Ratio Chart
Source: Zone Web
In recent months, the ratio chart of Reliance/Nifty50 hints at significant development. Before January 2024, this ratio chart exhibited a descending triangle pattern, indicating a period of consolidation and uncertainty regarding Reliance’s relative performance compared to the broader market index. However, the narrative took a decisive turn when the ratio chart finally broke out of this pattern, signalling a potential shift in momentum favouring Reliance Industries.
Despite this breakout, the slope of the ratio chart has since turned southwards, suggesting a possible retest of the triangle breakout. Such retracements are standard in technical analysis, often as opportunities to confirm or reverse prevailing trends. However, amidst these fluctuations, specific indicators offer glimpses of optimism for Reliance investors.
One such indicator is the positive divergence between the 50-week exponential moving average (50WEMA) and the 200-week exponential moving average (200WEMA). This divergence implies that despite the recent downturn in the ratio chart, Reliance’s stock price suggests it is poised to outperform the Nifty50 in the coming period.
NiftyEnergy/Nifty50 Ratio Chart
Source: Zone Web
Moreover, the outlook for the energy sector, of which Reliance is a significant player, appears promising based on the ratio chart of NiftyEnergy/Nifty. This chart indicates that energy stocks may continue outperforming the broader market index, further bolstering the case for Reliance Industries’ bullish trajectory.
In essence, the stage is set for Reliance to reclaim its throne as the stock market king. With its substantial weightage in the Nifty50 index, any significant rise in Reliance’s stock price is poised to have a ripple effect, propelling the broader index to new heights. Reliance stands tall in the dawn of a new era, ready to chart a course towards greater heights and unprecedented success.