BackRIL, HDFC Bank contribute over a third of Sensex’s market cap gain in 2017
While Sensex has gained 27.68% so far in 2017, Reliance and HDFC Bank share prices rose 70.77% and 58.14%, contributing 19.64% and 14.16% to the benchmark's market capitalization gains
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Mumbai: In a year the Sensex rose over 25%, around a third of the gains came from just two stocks—energy-to-telecom conglomerate Reliance Industries Ltd and private lender HDFC Bank Ltd.
While BSE’s 30-share Sensex gained 27.68% so far in 2017, Reliance and HDFC Bank shares gained 70.77% and 58.14% respectively. This translates to these companies contributing 19.64% and 14.16% respectively to the Sensex’s market capitalization gains.
In absolute terms, of the Rs12.62 trillion addition to the Sensex’s market capitalization, Rs2.48 trillion and Rs1.79 trillion came from Reliance and HDFC Bank respectively.
Reliance shares, meanwhile, could be on track to post their best yearly gains since at least 2009, while for HDFC Bank, it is likely to be the best stock price gain since 2012.
“Reliance’s outperformance comes in after almost a decade of underperformance," said Nirav Sheth, head of equities at SBI Cap Securities Ltd. “The billions of dollars of investments have started bearing fruit in E&P, refining and petchem. They (analysts) were earlier ascribing a negative value to telecom – and it is now looking to be a lucrative business going ahead," added Sheth.
In a 13 November report, Motilal Oswal Securities raised its target price on Reliance to Rs1,077 from Rs1,005, and reiterated its buy rating on the stock. Bloomberg data showed that 28 of 41 analysts tracking Reliance have a buy or overweight rating on the stock.
“HDFC Bank—has always done well. It is expensive, but it is an undisputed franchise in a market which is not saturated, and it continues to grow," said Sheth, who has a buy rating on the stock.
As many as 49 of 54 analysts tracking HDFC Bank have a buy or overweight rating on the stock.
HDFC Bank is also the most-held stock by domestic mutual funds in terms of number of schemes. As many as 500 schemes have HDFC Bank in their portfolio, Value Research data showed.
Reliance Securities maintained its buy rating on the stock on 6 November, while raising its target price to ₹ 2,065 from ₹ ,940 earlier based on 4.4 times fiscal year 2019 adjusted book value.
“Despite a mere 6.9% YoY growth in banking industry loan, its loan book grew by 22.3% YoY and 4.1% QoQ, led by higher growth in corporate, business banking and retail loan segments," Reliance Securities said in the note.
“This outperformance on loan growth front with a huge margin vs. the industry is really commendable as it is the second largest bank in India in terms of loan book size," Reliance Securities added.
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