Tata groups overtake Reliance

After losing out to Tatas as the most valued business house, Mukesh Ambani-led Reliance group has now slipped to the third position in terms of a corporate group's influence in moving the stock market benchmark Sensex.

On a stand-alone basis, Reliance Industries Ltd (RIL) remains the most influential of the 30-stock BSE Sensex, but it ranks below HDFC and Tatas taking into account cumulative weightage of their group companies on the index.

As per the information available with BSE, RIL's weight in Sensex is 10.73 per cent, which is bigger than any other stock on the index.

But, it is lower than Tata group's 11.17 per cent and HDFC group's 12.1 per cent at the group level.

About a year ago, RIL's weight was much higher at 14.16 per cent at the end of June 2010, which was biggest among all Sensex constituents, not only on a single company basis but also at the group level.

The Ratan Tata-led salt-to-software conglomerate has four companies on the Sensex, which also has two companies from Deepak Parekh-led HDFC group -- the flagship housing finance giant HDFC and private banking major HDFC Bank.

In comparison, RIL is the single Sensex company from the Mukesh Ambani-led group, which has only one more listed entity Reliance Industrial Infra Ltd.

Still, RIL has enjoyed the position of the most influential stock, not only on stand-alone but also on group basis, for a long time and movement in this stock has been crucial for any major fall or rise in the Sensex.

But, experts said, scenario seems to be changing as the benchmark Sensex rallied by more than 500 points last Friday without a single-point contribution from RIL, experts said.

They noted that it was an unprecedented development that the index has rallied by such a momentum without any help from its biggest heavyweight stock.

Sensex rose by 513.19 points or 2.9 per cent on Friday, even as RIL remained flat with a 0.03 per cent slip.

Commenting on RIL's under-performance, Way2Wealth's Chief Operating Officer Ambareesh Baliga said: "RIL hasn't been a contributor to the market movement specially on the positive side for a very long time."

"When the markets have fallen at that point of time RIL was a contributor. Last week, when the markets fell below 18,000-mark, Reliance was a contributor. In the fall it is a contributor but in the move up its not, because the stock has been a under-performer," he added.

RIL's Sensex weight has been falling over the past many months mostly because of the under-performance of the stock and a relatively better show by others.

At the end of June last year, the Tata group with four companies had total Sensex weightage of 8.8 per cent, while HDFC and HDFC Bank together had a weightage of 10.64 per cent.

Besides these, only Anil Ambani group has more than one company among the Sensex constituents.

However, both the ADAG firms on Sensex, RCom and Reliance Infra, are on their way out of Sensex and would be soon replaced by Coal India and Sun Pharma . Together, these two stocks have a Sensex weightage of 0.99 per cent.

The Sensex weightage of a stock is determined daily on the basis of the valuation of the free-float or non-promoter shareholding of these companies.

In terms of current stand-alone Sensex weights, RIL is followed by Infosys (9.56 per cent), ICICI Bank (8.4 per cent), ITC (7.23 per cent), L&T (6.54 per cent), HDFC Bank (6.08 per cent) and HDFC (6.02 per cent).

The Sensex weight of four Tata group companies are 4.57 per cent for TCS, 2.66 per cent for Tata Steel , 2.49 per cent of Tata Motors and 1.45 per cent of Tata Power.

Experts said that RIL's stand-alone highest weight could also come under pressure if it continues to under-perform and others like Infosys and ICICI keep up their rally.

However, the market is still hopeful of RIL regaining its earlier importance as a bellwether of the market.

Way2Wealth's Baliga said that RIL was a bellwether stock earlier but not now. However, it does not mean that the stock cannot bounce back to regain its lost status.

"People earlier used to pick up RIL, HUL, Infosys. The psyche has changed because RIL has been under-performing for a long time and automatically people tend to drift away from the stock if negativity persists for longer," he added.

Another analyst said that no stock can be expected to participate in each and every rally and there was no long-term threat to RIL's bellwether status.

However, a senior executive with a leading brokerage said that investors were favouring professionally-run companies which have their corporate governance rules in place.

"Besides, they are preferring widely held companies and not family run businesses. ONGC, Coal India, ICICI, Infy and L&T are the new icons. Companies with strong fundamentals, promising future, strong business strategy and heavy weightage on Nifty and Sensex are dictating the index," he added.

"Going forward, the market is going to be dictated by a combination of stocks, and not a single stock," he noted.

In terms of market valuation, the Mukesh Ambani-led group is currently ranked second with two companies (Rs 285,531 crore), after Tatas with their about 30 companies (Rs 430,659 crore). The HDFC group with three listed companies has a cumulative market value of Rs 210,220 crore.

Ambanis lose their shine with investors

India's billionaire Ambani brothers are struggling to rediscover their Midas touch after a year in which they have been battered by investigations and investor scepticism about their businesses.

Mukesh and Anil Ambani took over their father Dhirubhai's conglomerate after his death in 2002 but an acrimonious five-year scrap over the assets forced their mother to intervene and carve up the empire into two.

Elder brother Mukesh heads Reliance Industries, with assets in mostly the energy and petrochemicals sector while Anil created the Anil Dhirubhai Ambani group (ADAG), from its telecom, finance and utilities interests.

Shares in Mukesh's firm hit a two-year low last week and are down 20 percent in 2011 so far, while Anil's flagship Reliance Communication (RCom) shares have more than halved in the last 12 months.

"Once 'Dhiru' shares were in almost every investor's portfolio," said Hemen Kapadia, chief executive of investment advisory firm Chart Pundit, using the nickname brokers gave the Reliance Industries stock under the Ambanis' father.

"But Reliance stocks have lost some of their gloss," he told AFP.

Mukesh's Fortune Global 500 firm has been dragged down mostly by concerns about slowing gas output from its fields off India's east coast, raising valuation worries for other still-to-be-explored assets.

Output from the KG-D6 field has tumbled nearly 17 percent to 50-51 million metric standard cubic metres a day (MMSCMD), from a peak of 60 MMSCMD last year.

The group had been expected to get a major boost from a $7.2-billion deal with British energy giant BP to explore the Indian company's existing and uncharted deepwater oil and gas fields.

But with gas output falling "the potential valuations for Reliance's future oil reserves... is evaporating," said one oil analyst with a Mumbai-based firm, who declined to be named.

Another headache comes as the energy giant finds itself at the centre of controversy after the national auditor claimed that India's oil ministry and regulator favoured Reliance as it developed the KG-D6 field.

Reliance hit back in a letter to the oil ministry this week, saying its reputation was "severely impacted" by the allegations.

Anil, meanwhile, saw ADAG removed from the leading Sensex index on the Bombay Stock Exchange last week, just as he was trying to revive its fortunes.

The group has faced headwinds since April after federal police quizzed the tycoon and other executives as part of a probe into one of India's biggest graft scandals, involving the awarding of telecom licences in 2008.

Three senior executives from Reliance Telecom are on remand in prison facing charges of cheating, forgery and criminal conspiracy in the high-profile case, which is thought to have cost the country billions of dollars.

A cloud hangs over the group, particularly RCom, said Jagannadham Thunuguntla, head of research with SMC Global Securities in New Delhi.

"Perception is weak, due to regulatory and financial concerns," he said.

Anil has for more than a year been trying to find a foreign investor to buy a 26-percent stake in RCom, which would help lower its ballooning debt of $7.18 billion.

RCom, India's second-biggest mobile phone firm, with a 16.5 percent share, has recorded seven straight quarterly falls in profit, even though India is the world's fastest growing mobile phone market, with 827 million subscribers at April-end, a 35 percent jump year-on-year.

Competition is intense and margins are falling.

To add insult to injury, rival conglomerate Tata Group became India's biggest in terms of market capitalisation last week, beating the combined value of the brothers' companies.

The salt-to-steel Tata Group was worth 4.32 trillion rupees ($96 billion) while the combined worth of the two Ambani brothers groups was 3.46 trillion rupees.

Reliance Industries told reporters it did not comment on share prices. ADAG was not available for comment.