Diesel crack surge, INR depreciation and retail tailwinds support Reliance outlook: JP Morgan

New Delhi [India], October 1 : Reliance Industries Limited (RIL) is expected to benefit from the recent surge in diesel cracks, seasonal demand, and depreciation of INR, according to a report by JP Morgan, which has maintained an Overweight (OW) rating on the stock with a September 2026 price target of Rs 1,695.

Diesel cracks have risen sharply over the past monthfrom around USD 16/bbl to approximately USD 20/bbldriven by falling Russian diesel exports. JP Morgan estimates these exports have declined by about 200kbpd since early August, from 880kbd to 693kbd by the end of that month.

A diesel crack refers to the profit margin refiners earn by converting crude oil into diesel. It's the difference between the price of diesel and the price of crude oil.

The report further added that Russia's planned partial ban on diesel exports for resellers, lasting through end-2025, and strong seasonal domestic demand in September and October could reduce volumes to below 620kbd.

While the current strength in diesel cracks may not fully reflect in RIL's September quarter earnings due to weaker margins in August, JP Morgan notes that refining margins have risen USD 3.6/bbl since September 1.

The Brent-Dubai spread turning positive again also supports RIL's refining margins. Additionally, the 2 per cent QoQ depreciation of the INR could bolster O2C EBITDA for the quarter.

"The Brent-Dubai spread has turned positive again, which should help RIL's margins. Our tracker for RIL's petchem margins is up QoQ, but the exit rates are weaker. The c.2% QoQ depreciation of the INR could help support RIL's O2C EBITDA for the quarter," the report said.

INR depreciation refers to the Indian Rupee weakening against the US Dollar. For exporters and companies earning in USD, this results in increased rupee earnings upon conversion.

Every USD 1/bbl increase in Gross Refining Margins (GRM) could lift RIL's FY27E consolidated EBITDA by around 2 per cent and PAT by approximately 4 per cent, the report said. While near-term strength may continue, global refining utilisation is expected to rise gradually through 2026, it noted.

In other segments, Reliance Retail could see improved revenues in the December quarter following recent GST cuts ahead of the festive season.

"The reduction in GST rates ahead of the festive season should also lift revenue for Reliance's retail business in the December quarter, though September outcomes are likely to be weaker than earlier expectations. RJIO could see a modest benefit from changes to entrylevel pricing, but a broader increase in tariffs is still likely, in our view, especially ahead of the announced 2026 listing," the report said.

RIL's earnings growth, once driven by capex and margin cycles, is now anchored by Retail and Telecom, which are projected to contribute 54 per cent of FY25 EBITDA and nearly all net growth over the next three years.

JP Morgan expects RIL to generate positive free cash flow, with ongoing investments in new energy and petchem expansions.

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