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The Reliance Industries stock runs the risk of losing its numero uno status in the Nifty if it continues the losing streak that began as far back as May 2009.
The stock, which quoted at Rs 1,267.5 (adjusting to bonus price) on May 18, 2009, has since shed Rs 372 to close on Tuesday at Rs 895.5 (a reduction of 29 per cent) even as the NSE's S&P CNX Nifty index gained 25 per cent during this period. The stock currently enjoys a weight of 9.39 per cent in the 50-stock index just a shade higher than Infosys (9.22 per cent).
The weightages are automatically adjusted on a daily basis by the NSE depending on free-float market capitalisation (non-promoter holdings) stocks in a company. In such circumstances if the Reliance stock loses in value by roughly a per cent more than what Infosys does then it would be relegated to the Number 2 spot.
Shareholding pattern
The gap, in May 2009, between Reliance Industries and the second largest company in Nifty then (ONGC) was quite wide with the former carrying a weightage of 13.76 per cent followed by ONGC (7.48 per cent) and Bharti Airtel (7.03 per cent). Of course, then the Nifty weightage was calculated using full market capitalisation.
The increase in foreign institutional investors' holding in the company over the last 18 months has failed to lift the Reliance Industries stock. FIIs have increased stake in the company to 17.62 per cent at the end of December 2010 from the March 2009 figure of 15.99 per cent. LIC, the leading domestic institutional investor, also increased its stake to 7.04 per cent (5.52 per cent).
The holding of retail investors has also increased to 13.08 per cent (11.26 per cent). However, promoters' holding has decreased to 44.73 per cent (49.03 per cent).
On the performance front too, Reliance Industries has performed reasonably well. It's standalone cumulative net profit for the nine months so far in FY-11 already stands at Rs 14,910 crore, compared with the Rs 16,236 crore clocked in the whole of FY-10, and Rs 15,619 crore achieved in the FY-09. Cumulative net turnover in the nine-month of FY-11 stands at Rs 1,75,496 crore, while FY-10 and FY-09 revenues were Rs 1,92,461 crore and Rs 1,41,847 crore respectively.
The company's performance in the coming quarter too is expected to be healthy with the outlook for the refining and petrochemical segments looking up.
What ails the Reliance story? The dispute between RNRL and Reliance Industries over gas pricing, which was settled by the Court later, acted as drag on the stock initially.
Then, there was the insider trading case relating to alleged violation of insider trading norms way back in 2007 in the dealings of shares of the now-delisted subsidiary Reliance Petroleum (RPL).
Market participants expect the case to be settled any time soon through the consent route, which Reliance tried twice earlier.
Output from KG-D6 wells
The biggest worry currently though is the output from the KG-D6 wells. The market which had expected a quick recovery in the ramp-up from the 60 mmscmd levels has been disappointed with the output decline to around 54 mmscmd.
Uncertainty on this front is among the major overhangs on the stock.
“As per RIL, it is under discussion with DGH on the KG - D6 output ramp-up issue, including some technical topics regarding the reservoir. The exact nature of these problems remains unclear, but the ambiguity suggests that the output increase is unlikely to occur in the near future,” said a Elara Capital research report
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