Reliance Industries has faced a challenging start to 2026, with shares declining approximately 7% year-to-date and the company shedding nearly ₹1.4 lakh crore in market capitalization. The selloff represents a dramatic reversal for a stock that outperformed the Nifty with a 29% rally in 2025, as investor concerns over Russian crude exposure and softer retail growth momentum trigger a sharp recalibration of expectations.

The market correction comes as the company prepares to report its December quarter earnings, with brokerages framing the upcoming results as a tale of contrasting business performance. While energy operations are expected to shine, the retail segment faces headwinds from weak discretionary spending patterns observed across organized retail peers.

Energy Segment Expected to Drive Q3 Performance

Brokerages anticipate strong performance from Reliance's Oil to Chemicals (O2C) segment in the December quarter. The energy division is projected to benefit from sustained refining upcycle momentum, with multiple analysts forecasting robust EBITDA growth.

Morgan Stanley expects December quarter EBITDA to rise 10.00% year-on-year, driven primarily by the 16.00% year-on-year EBITDA growth in the O2C segment. However, profit growth is projected to remain muted at just 1.00% year-on-year due to capitalization of interest and depreciation expenses, particularly for the telecom vertical.

Goldman Sachs projects O2C EBITDA to grow 11.00% quarter-on-quarter and 16.00% year-on-year, with stronger refining earnings expected to more than offset declines in petrochemical earnings. Axis Capital's Gaurav Malhotra projects consolidated EBITDA of ₹467.00 billion, representing growth of 2.00% quarter-on-quarter and 7.00% year-on-year.

Retail Segment Faces Growth Deceleration

The retail division, previously a key growth driver, now confronts significant headwinds. Goldman Sachs has lowered its sales growth expectation for Reliance Retail to around 10.00% year-on-year in the December quarter, down from an earlier estimate of 12.00% and significantly below the 21.30% growth posted in the September quarter.

Morgan Stanley estimates 9.00%-10.00% year-on-year retail topline growth, factoring in a 150 basis point negative impact from the demerger of the consumer products vertical. The moderation reflects weak discretionary spending, base effects, and festive timing shifts that have impacted the broader retail sector.

Russian Crude Concerns Addressed by Analysts

Despite market concerns over Russian crude exposure, Goldman Sachs argues these fears are overblown. The brokerage sees limited impact on the company's medium-term earnings profile, noting that refining fundamentals remain supported by tight product markets through 2027. Crude differentials across alternative grades, including Middle Eastern barrels, are improving and could help sustain strong refining margins even if Russian crude exposure were to reduce further.

Additional upside risks to refining margins exist in a scenario of revival in crude sourcing from Venezuela, with Morgan Stanley highlighting the strong performance of global refineries as supportive of their positive stance.

2026 Positioned as Catalyst Year

Brokerages maintain optimistic long-term outlooks, positioning 2026 as a pivotal year with multiple value-driving catalysts. Morgan Stanley remains overweight with a price target of ₹1,847.00, expecting investments over $80.00 billion to be monetized starting from 2026 as part of Reliance's fourth monetization cycle.

Jefferies maintains a Buy rating with a target of ₹1,830.00, projecting 13.00% consolidated EBITDA growth in FY27 with Jio expected to deliver the heavy lifting. The brokerage anticipates Jio to achieve 22.00% year-on-year revenue growth in FY27, supported by tariff hikes in the mobile segment and continued momentum in home broadband.

Valuation Support Emerges from Correction

The recent market correction has created attractive valuation opportunities. Axis Capital notes that Reliance trades at 10.70x one-year forward EV/EBITDA, representing approximately 11.00% discount to its past five-year average. Morgan Stanley expects a 12.00% earnings CAGR over FY25-28, driven by tight refining cycles, global involution in chemicals, new energy ramp-up, and monetization of retail and digital investments.

Reliance Industries Ltd is positioned for a mixed performance in the December quarter (Q3FY26), with its oil-to-chemicals (O2C) business expected to be the primary growth driver while the oil and gas segment faces ongoing challenges, according to estimates from brokerage firm Jefferies.

O2C Business Expected to Lead Performance

The Mukesh Ambani-led conglomerate's oil-to-chemicals division is anticipated to deliver strong results during Q3FY26, primarily supported by a sharp improvement in refining margins. This improvement in margins is expected to significantly boost the overall performance of the O2C segment, which has been a key revenue contributor for the company.

Oil & Gas Segment Under Continued Pressure

In contrast to the positive outlook for the O2C business, Reliance Industries' oil and gas segment is expected to remain under pressure during the December quarter. The segment continues to face headwinds that are likely to impact its contribution to the company's overall financial performance in Q3FY26.

Quarterly Performance Expectations

The contrasting performance expectations between the two major business segments highlight the diverse nature of Reliance Industries' operations. While the O2C business is set to benefit from favorable market conditions, particularly improved refining margins, the oil and gas division's challenges underscore the varied market dynamics affecting different parts of the business.

The December quarter results will provide insights into how effectively the company's diversified portfolio performs across different market conditions, with the O2C segment's strength potentially offsetting challenges in the oil and gas division.

Source: https://www.cnbctv18.com/market/reliance-industries-share-price-q3-preview-o2c-growth-oil-gas-ws-l-19820165.htm