Think US stock market gains are concentrated? Just look at India1 min read . Updated: 15 Sep 2020, 01:13 PM IST
- The ballooning weighting of Reliance has also become a problem for mutual funds as they hit a regulatory limit for holding a single stock
- This means money managers can’t add rising stocks, such as Reliance, and therefore risk trailing the market, according to Kotak Asset Management Co.
The Indian stock market’s extreme reliance on just a single stock almost makes top-heavy U.S. equities look healthy.
A 163% surge in Reliance Industries Ltd. -- India’s largest stock by market capitalization -- accounted for about 44% of the benchmark S&P BSE Sensex Index’s rally since equities bottomed on March 23. In comparison, the so-called FAANG stocks in the U.S. made up 22% of the S&P 500’s surge during the same period, according to data compiled by Bloomberg.
Owned by Asia’s richest man Mukesh Ambani, the oil-refining major has seen its market value nearly double to more than $200 billion this year after a major push into digital and e-commerce ventures won it a flurry of investments with Facebook Inc., Google and other Silicon Valley giants. Reliance now has a 17% weighting on the Sensex index, up from 10% a year ago, and has propelled the measure up 49% since the March low.
The ballooning weighting of Reliance has also become a problem for the nation’s mutual funds as they hit a regulatory limit for holding a single stock. This means money managers can’t add rising stocks, such as Reliance, and therefore risk trailing the market, according to Kotak Asset Management Co.
Compared with India, the run up in American equities doesn’t appear as narrow. The U.S.’s largest stock, Apple Inc., contributed about 11% to the S&P 500’s jump since March as the iPhone maker’s market cap. crossed $2 trillion. That’s followed by Microsoft Corp., Amazon.com Inc. and Facebook Inc. Netflix Inc. didn’t feature in the top 20 contributors, given its 0.7% weight in the benchmark. Gains appeared more evenly distributed for the European benchmark gauge.