India’s stock index gains ride too heavily on Reliance Industries

Bloomberg September 15 | Updated on September 15, 2020 Published on September 15, 2020

The 164 per cent surge in Reliance share price accounted for over 40 per cent of index gains

The Indian stock market’s extreme reliance on just a single stock almost makes top-heavy US equities look healthy.

A 164 per cent surge in Reliance Industries Ltd — India’s largest stock by market capitalisation — accounted for about 43 per cent 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 US made up 22 per cent 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.

Also read Mukesh Ambani moves up to fourth rank in global rich list

Reliance now has a 17 per cent weighting on the Sensex index, up from 10 per cent a year ago, and has propelled the measure up 50 per cent since the March low.

Also read How Mukesh Ambani has investors lining up for Reliance Retail stake

The ballooning weighting of Reliance has also become a problem for the nations actively-managed funds as they hit a regulatory limit for holding a single stock. This means money managers cannot add rising stocks, such as Reliance, and therefore risk trailing the market, according to Kotak Asset Management Co.

Also read Reliance’s market heft becoming liability for Indian stock funds

Compared with India, the run up in American equities doesnt appear as narrow. The US’ largest stock, Apple Inc, contributed about 11 per cent to the S&P 500’s jump since March as the iPhone maker’s market capitalisation crossed $2 trillion. That’s followed by Microsoft Corp, Inc and Facebook Inc. Netflix Inc didn’t feature in the top 20 contributors, given its 0.7 per cent weight in the benchmark. Gains appeared more evenly distributed for the European benchmark gauge.

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Published on September 15, 2020
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