Mumbai: Shares of India’s largest firms have been climbing sharply as the stock market sizzles. But the jump in prices of some firms controlled by what may now be the world’s richest family has been the most significant—and most puzzling.

The Ambani brothers, Anil and Mukesh, control a group of companies that mostly use the Reliance name. The brothers, who had a falling out a few years ago, now each runs different parts of an empire that their father constructed, one that includes everything from oil and supermarkets to real estate and telecom.

In recent months, the ascent of some Reliance companies’ stock has been so steep that, together, the two Ambanis are now worth close to $100 billion (Rs3.96 trillion), analysts say.

On paper, the elder brother, 50-year-old Mukesh, has more than $45 billion, most of it reflecting his 51% stake in Reliance Industries Ltd (RIL), India’s largest company, according to a recent Forbes magazine’s list of India’s richest. His 48-year-old brother Anil’s wealth weighs in at more than $35 billion, partly through his holdings in Reliance Communications Ltd (RCom), his flagship concern.

The suddenness of the Ambanis’ wealth tsunami has some analysts and investors scratching their heads.

Consider this: The Bombay Stock Exchange’s benchmark index Sensex has spiked about 30% in the past three months, setting a record intra-day high above 20,000 on 29 October, before losing some ground to end Friday at 18,852.87. But during the same period, Reliance Petroleum Ltd (RPL), a refining firm, has climbed 90%. Reliance Energy Ltd, a power firm, has surged more than 130%. Gas-trading firm Reliance Natural Resources Ltd has skyrocketed more than 250%.

Some market watchers wonder why. While Reliance companies’ shares have been surging amid market rumours of better profits and new expansion plans, their rally has gone much further than fundamentals should allow, analysts say.

“It stopped making sense after a while," says Ashwani Gujral, head of Ashwani Gujral Investment & Portfolio Management in Gurgaon.

Even the biggest Reliance firms have beaten the market, despite already having gargantuan market values because they have attracted a slew of foreign investors in recent years. Shares of RCom have risen more than 35% in the past three months, lifting its market capitalization to about $35 billion. RIL’ stock price has jumped 60% over the period.

That makes RIL, which is 20%-owned by foreign investors, India’s largest listed company, with a market value of close to $100 billion.

To some extent, the rally in the Reliance companies’ stock makes sense. Both Ambani brothers control corporate stables that include some of India’s most profitable and best-managed blue-chip stocks. Billions of dollars in foreign investment has poured into India in recent months and anyone building an Indian portfolio has to hold RIL and RCom, says John Band, president of investment consultancy Zoom Cortex. “Foreign investors are interested in the sort of things the Reliance companies are doing and there is a shortage of other investment opportunities," Band says. “The Reliance pack has consistently shown dramatic growth so they can potentially attract even more foreign money."

The soaring prices of the smaller Reliance firms are harder to explain, however. Speculation abounds that the Ambanis are using their many holding firms to buy shares in their listed concerns, to solidify control of those firms or to lift their stock prices so they can raise more money through new share sales.

Company founders and their families and friends—called “promoters"—are allowed to buy more of their own companies’ shares and are often blamed for sharp price movements. Under Indian regulations, this class of investors can buy shares in their own fir-ms through the stock market.

Spokesmen from both sides of the Reliance empire denied that their own companies were behind the surge in the share prices. In fact, RIL announced Friday that it has sold some of its RPL shares to profit from their high price.

Whatever the case, many analysts and investors say some of the Reliance companies are now overvalued. “Compared to the kind of revenue numbers they are showing, they look expensive, but these stocks don’t move on numbers anymore," says Prayesh Jain, research analyst at India Infoline in Mumbai. He says the prices are spi-king because of speculation.

RPL, for instance, has been rising amid expectations that Chevron Corp., which currently owns 5% of the company, will boost its stake to 29%. Chevron has an option to buy the larger stake from RIL, but hasn’t decided whether it will do so, according to spokesmen for Reliance and Chevron.

Even assuming that its new refinery begins operations well before its planned start at the end of next year, RPL is trading at more than 25 times earnings projected for the year ending 31 March 2009. That’s about twice the average price-earnings (P-E) multiple of similar refining firms trading around the globe. Nonetheless, RPL— formed just last year—has now become one of India’s 15 biggest companies with a market value of more than $20 billion even before refining its first drop of oil.

Reliance Energy—a power company with a market value of about $10 billion that is 35%-owned by Anil Ambani— has been surging amid hopes that its plans to spin off part of its operations into a separate firm, Reliance Power, will help both firms become more profitable. However, with a P-E multiple of close to 50, any benefits of the spin-off are already in the price, analysts say. The share rose 7.5% to Rs1,725.10 on Friday.

Reliance Natural Resources, another firm controlled by Anil Ambani, has enjoyed the most puzzling rally of all. It holds the rights to buy natural gas from RIL at a fixed price, well below that at which Reliance is selling gas to other firms. Still, the profits from that deal already are reflected in the stock price, analysts say.

Although Reliance Natural Resources’ net income was only about $7.5 million in the year ended March, its market capitalization has ballooned to more than $5 billion, giving it a P-E multiple of more than 300.

Small investors “are getting overexcited about it," Gujralof Ashwani Gujral Invest-ment says.