The Hindu Business Line : How Reliance drove the Sensex to 17K

BL Research Bureau Market observers cheering the Sensex’s dash to the 17,000 milestone would know that the stock that engineered the latest 1000-point dash in the barometer is Reliance Industries (RIL).

But this is not the first occasion on which RIL has helped Sensex scale new highs. In the last 7000-point rise in the Sensex, the contribution of the RIL stock alone has been an awesome 2,076 points!

Besides being the largest private sector company in India in terms of turnover, profitability and net worth, RIL also enjoys the top weights in both the Sensex and Nifty. This makes the stock indispensable to India-dedicated funds that invest in the Nifty or Sensex basket. The stock has also been a hot favourite across mutual fund portfolios over the past year, as fund managers hoping to outpace their benchmarks have accumulated it in big numbers.

Positive news flow

This apart, the positive news flow in RIL has also given enough reasons for investors to retain an unflagging interest in this stock over the last one year. The high profile foray into retailing with Reliance Fresh, the discovery of oil and gas in the Cauvery and the Krishna basins and the recent acquisition of the assets of the Malaysia-based Hualon Corporation, have all kept investors excited about the prospects for the company.

Leading the way

In the journey from 10,000 to 17,000 in the Sensex, RIL has been the top contributor to the move in five out of seven occasions. The stock was subdued in the initial move from 10,000 to 11,000, in the aftermath of the group de-merger and the skirmish between the two brothers, which was initially viewed unfavourably by the markets. The only other instance when the RIL was not the top contributor to a big 1000-point move in the index was between October and December 2006. The underperformance then was attributable to the sharp fall in the international crude oil prices and the fire in the Jamnagar refinery, which caused some consternation among investors.

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