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Best Wishes!!

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Friday, July 8, 2011

Reliance Group is No Longer the Most Valuable Group in India

The title sounds interesting, doesnt it? Yes, for all of you who thought that the Mukesh Ambani led Reliance Group is the most valuable group of companies in the stock market, you are in for a surprise.

Reliance Group is no longer the most valuable company in India. It is now currently in 3rd place after TATA Group in the no.1 spot and HDFC group in the no.2 spot. Read on to know more about how and why!!!

Before we begin: How do you term a company is the most Valuable Company in India?

You might be aware of the fact that, the BSE Sensex is made up of the 30 largest companies in India. Each company has a weightage in the index. The price movement of each of the 30 companies will affect the index based on their weightage. Let us say company A has a 5% weightage and another company B has 2.5%. This effectively means that the amount BSE Sensex will go up when company A goes up by 10 Rupees will be the same when company B goes up by 20 Rupees. This is because Company A has twice the weightage as Company B and hence B has to rise by twice the amount as A in order to have the same impact on the Index.

That being said, you may be able to guess where I am going. The Most Valuable company would be the one which has the highest weightage in the BSE Sensex.


What is the Most Valuable Company in India?

We are talking about the single most valuable or influential company in terms of Index movements. On a stand-alone basis, Reliance Industries Ltd (RIL) remains the most influential of the 30-stock BSE Sensex.


If Reliance Industries is the most influential company, how come Reliance Group isnt the Most Valuable Group?

If you had this question lingering in your mind, the answer is part of the question. Reliance Industries is indeed the single most valuable company, but as a group, there are other conglomerates that have more than one company that is part of the BSE Sensex and hence their total is much higher than Reliance.

Who are they and what are the numbers?

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, as a group, the TATA Groups weight is 11.17% and the HDFC Groups 12.1%

Now you can see why Reliance Group is in 3rd place behind the TATAs and the HDFC Group. You may ask me if there is no other company from Mukesh Ambani's Reliance group that is part of the Sensex. No, unfortunately his other companies arent part of the Index and hence the other groups with multiple companies whose individual weightages are less than RIL have overtaken Reliance group by sheer numbers.


What are the Individual Companies in TATA Group and HDFC Group that contribute to these numbers?

TATA Group:

TCS - 4.57%
TATA Stell - 2.66%
TATA Motors - 2.49%
TATA Power - 1.45%

Total TATA Group: 11.7%

HDFC Group:

HDFC Bank: 6.08%
HDFC Corp: 6.02%

Total HDFC Group: 12.1%

What about History?

Reliance Industries, by itslef has been in the no.1 spot for a very long time. But, because of various reasons, the contribution of RIL to the BSE Sensex has been significantly lesser than what it used to be a few months back. Because RIL has underperformed for so long, its weightage on the Sensex has been repeatedly reduced by BSE. 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. But, now it is only 10.73%.

Who are the top Companies in India based on Sensex Weightage?

In terms of current stand-alone Sensex weights the Top company's are:

1. Reliance Industries - 10.73%
2. Infosys - 9.56%
3. ICICI Bank - 8.4%
4. ITC - 7.23%
5. L&T - 6.54%
6. HDFC Bank - 6.08%
7. HDFC - 6.02%

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