Tuesday, February 22, 2011

Has RIL lost its mojo?

Reliance has announced what is being described as a game changing deal with BP worth billions of dollars and possibly India’s biggest FDI deal. But is it game changing for the stock market? Is Reliance still the axis around which the market revolves? My research throws up an unequivocal no as the answer.

Let’s turn the clock back to June 2009. That was the time RIL used to contribute a massive 16.3% to the Sensex. Since then the weight has gradually come down quarter after quarter and it has now fallen to 11.9%. Still largest, but clearly quite a dilution from almost 2 years back. Here is the data

RIL weight in SensexWeight (%)
June 200916.3
Dec 200914.8
March 201014.5
June 201014.3
Sep 201011.5
Dec 201012.1

The contenders on the other hand have been fast in climbing up the ladder. While HUL has fallen by the wayside, ITC and Infosys are giving RIL a strong run for its money. Here is the data

RIL, ITC differenceDifference(%)
June 20099.2
Dec 20097.1
March 20106.5
June 20105.2
Sep 20102.1
Dec 20103.0

Not just that, the combined weight of ITC and Infosys now is much higher than RIL. Not long back, RIL used to have higher weight than the other 2 combined. Here is the data

RIL Vs ITC+InfosysRIL WeightWeight of ITC+Infosys
June 200916.313.8
Dec 200914.815.6
March 201014.516
June 201014.317.3
Sep 201011.517.4
Dec 201012.117.9

And now, lets talk about the single most important factor for that change, the stock price performance. And just look at the following data, its startling. RIL has been a massive underperformer.

Stock returnRIL StockITC StockInfosys Stock
Since June 2009-5%+66%+78%
Since Dec 2009-12%+26%+21%
Since Mar 2010-11%+20%+21%
Since June 2010-12%+4%+13%
Since Sep 2010-3%-11%+4%
Since Dec 2010-9.6%-9.3%-8.2%

Conclusion: Has RIL lost its mojo? Well, it remains a very important stock for the market, but it does not make or break the market any more. Its similar to what Sachin Tendulkar is to the Indian cricket team. 10 years back, he was a one man team. Today, he remains the most important member but the team does not depend on just him.

Disclaimer: The author of this article does not invest/trade in stock markets including derivatives. His only exposure to stock markets is via the stock options of TV18 and Network18 given to him by his company as part of his compensation


  1. its an interesting fact that many BANIAS here VANIAS at GUJARAT, are selling their decade long holding in RELIANCE because they have moved to hotel business by acquiring stake in EIH...Its against the religion of banias to buy company involved with LIQUA/HOTEL business....I think people normally ready to accept RELIANCE AS a core refining and petchem company other business unncessary hurting its image and which is quite visible in the screen

  2. Hi Anuj,

    Good job and great analysis which can be helpful for Devising Portfolio on basis of Beta value.I have a blog and a website.Fortunately i have been on right side of the market in past 5 years(since i started my blog) in calling the bottom or top of the market.How can i give my views on CNBC TV 18? Can u guide me? my email is acestocktips@gmail.com

    Warm Regards,

    Ace Stock Tips Team

  3. Reliance in all probability will De-merge its E&P business to de-risk its balance sheet but this would come only when MAT(tax regime) is tweaked.I anticipate this de-merger in next 18-24 months and i believe that this BP deal is a prelude to the bigger move.Reliance should not go for over diversification(hotel/retail business etc) and stick to its core competency.IMHO

  4. Very nice Anuj! Excellent Break up for someone who is now sitting overseas and missing the day to day action!!!

  5. comparison with sachin tendulkar was nice.keep it up!

  6. Brillient Anuj

    Pl read this


    Second article with heading "Sensex -New high and Reliance"

    You will be surprised with the finds, done by most hidden(gem) technical analyst in India.

  7. Hi Anuj,

    A very nice study. But one clarification required. Weight of RIL in sensex is 12.33% while weight of ITC is 5.81%. So the difference comes out to be 6.52%??

    Can you please throw some light into your calculation.

    Thanks & Regards,


  8. Hi
    Gr8 wrk.
    wud like to share smetin abt a stock I hav been tracking since 17 months. A very unique trend can be observed in management changes of orchid chem. It goes in the foll way:
    The then chairman Dr. C.B.Rao resigns ("Health reasons", u kno)
    Mr Anil Thadani, a long time Board Member resigns.
    Mr R. Rajkumar, alt member on the board, resigns.
    Dr. M. Girinath, a long time board member, resigns. Strikingly he has been selling his orchid stocks consistently since September, 2010.
    Dr. I.S. Naidu, a long time board member resigns. "Co-incidently" he also has been selling his stock since Sep-2010.

    Why is that so many of the BOARD MEMBERS been resigning from the company?? This company is sure on the verge of a turnaround. But with all des board members now not on the board and some selling their stocks in da secondary market makes one feel otherwise. (One can luk at Crompton Greaves move very recently). Is there sometin cukin which is why the stock tanked in these few weeks? One feels circumspect about one's investment in the stock.
    Your comments will be valuable.

  9. Hi @Niksh,

    Thanks for writing.

    Please provide me with your e mail address and I will get back to you with my comments after I research the subject