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 Sensex	Weight (%)
June 2009	16.3
Dec 2009	14.8
March 2010	14.5
June 2010	14.3
Sep 2010	11.5
Dec 2010	12.1
Current	11.9

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 difference	Difference(%)
June 2009	9.2
Dec 2009	7.1
March 2010	6.5
June 2010	5.2
Sep 2010	2.1
Dec 2010	3.0
Current	3.0

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+Infosys	RIL Weight	Weight of ITC+Infosys
June 2009	16.3	13.8
Dec 2009	14.8	15.6
March 2010	14.5	16
June 2010	14.3	17.3
Sep 2010	11.5	17.4
Dec 2010	12.1	17.9
Current	11.9	18

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 return	RIL Stock	ITC Stock	Infosys 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