HDFC, Tata groups overtake Reliance as bigger market movers

HDFC, Tata groups overtake Reliance as bigger market movers

New Delhi: After losing out to Tatas as the most valued business house, Mukesh Ambani-led Reliance group has now slipped to the third position in terms of a corporate group’s influence in moving the stock market benchmark Sensex.

On a stand-alone basis, Reliance Industries Ltd (RIL) remains the most influential of the 30-stock BSE Sensex, but it ranks below HDFC and Tatas taking into account cumulative weightage of their group companies on the index.

As per the information available with BSE, RIL’s weight in Sensex is 10.73%, which is bigger than any other stock on the index.

But, it is lower than Tata group’s 11.17% and HDFC group’s 12.1% at the group level.

About a year ago, RIL’s weight was much higher at 14.16% at the end of June 2010, which was biggest among all Sensex constituents, not only on a single company basis but also at the group level.

The Ratan Tata-led salt-to-software conglomerate has four companies on the Sensex, which also has two companies from Deepak Parekh-led HDFC group - the flagship housing finance giant HDFC and private banking major HDFC Bank.

In comparison, RIL is the single Sensex company from the Mukesh Ambani-led group, which has only one more listed entity Reliance Industrial Infra Ltd.

Still, RIL has enjoyed the position of the most influential stock, not only on stand-alone but also on group basis, for a long time and movement in this stock has been crucial for any major fall or rise in the Sensex.

But, experts said, scenario seems to be changing as the benchmark Sensex rallied by more than 500 points last Friday without a single-point contribution from RIL, experts said.

They noted that it was an unprecedented development that the index has rallied by such a momentum without any help from its biggest heavyweight stock.

Sensex rose by 513.19 points or 2.9% on Friday, even as RIL remained flat with a 0.03% slip.

Commenting on RIL’s under-performance, Way2Wealth’s Chief Operating Officer Ambareesh Baliga said: “RIL hasn’t been a contributor to the market movement specially on the positive side for a very long time."

“When the markets have fallen at that point of time RIL was a contributor. Last week, when the markets fell below 18,000-mark, Reliance was a contributor. In the fall it is a contributor but in the move up its not, because the stock has been a under-performer," he added.

RIL’s Sensex weight has been falling over the past many months mostly because of the under-performance of the stock and a relatively better show by others.

At the end of June last year, the Tata group with four companies had total Sensex weightage of 8.8%, while HDFC and HDFC Bank together had a weightage of 10.64%.

Besides these, only Anil Ambani group has more than one company among the Sensex constituents.

However, both the ADAG firms on Sensex, RCom and Reliance Infra, are on their way out of Sensex and would be soon replaced by Coal India and Sun Pharma. Together, these two stocks have a Sensex weightage of 0.99%.

The Sensex weightage of a stock is determined daily on the basis of the valuation of the free-float or non-promoter shareholding of these companies.

In terms of current stand-alone Sensex weights, RIL is followed by Infosys (9.56%), ICICI Bank (8.4%), ITC (7.23%), L&T (6.54%), HDFC Bank (6.08 %) and HDFC (6.02%).

The Sensex weight of four Tata group companies are 4.57% for TCS, 2.66% for Tata Steel, 2.49% of Tata Motors and 1.45% of Tata Power.

Experts said that RIL’s stand-alone highest weight could also come under pressure if it continues to under-perform and others like Infosys and ICICI keep up their rally.

However, the market is still hopeful of RIL regaining its earlier importance as a bellwether of the market.

Way2Wealth’s Baliga said that RIL was a bellwether stock earlier but not now. However, it does not mean that the stock cannot bounce back to regain its lost status.

“People earlier used to pick up RIL, HUL, Infosys. The psyche has changed because RIL has been under-performing for a long time and automatically people tend to drift away from the stock if negativity persists for longer," he added.

Another analyst said that no stock can be expected to participate in each and every rally and there was no long-term threat to RIL’s bellwether status.

However, a senior executive with a leading brokerage said that investors were favouring professionally-run companies which have their corporate governance rules in place.

“Besides, they are preferring widely held companies and not family run businesses. ONGC, Coal India, ICICI, Infy and L&T are the new icons.

Companies with strong fundamentals, promising future, strong business strategy and heavy weightage on Nifty and Sensex are dictating the index," he added.

“Going forward, the market is going to be dictated by a combination of stocks, and not a single stock," he noted.

In terms of market valuation, the Mukesh Ambani-led group is currently ranked second with two companies ( 285,531 crore), after Tatas with their about 30 companies ( 430,659 crore). The HDFC group with three listed companies has a cumulative market value of 210,220 crore.