The Street has entered one of its most boring phases. The Budget is done and dusted, the rate cuts it clamoured for have happened and even the Indian cricket team has exceeded expectations down under. Yet, the 30,000-points barrier on the Sensex has proven too strong to be convincingly broken through. The next possible trigger of fourth-quarter results seem far away and not so rosy.
Reliance Industries (RIL) continues to be an underperformer. Look at the crowns it has lost. It is no longer the most valuable company in the market and by a mile. Tata Consultancy Services (TCS), with a market cap over Rs 5 lakh crore and now almost twice as valuable as RIL, also recently snatched the most profitable company tag from the conglomerate. Though RIL is the second most valuable company (Mcap of Rs 2.7 lakh crore) as I write this, there are at least four more breathing down its neck in less than a five per cent range. So, on a bad day, RIL could quickly slide down to sixth spot in the market it once ruled.
Perhaps a more personal and painful loss would have been the tag which now belongs to Dilip Shangvi of Sun Pharmaceutical. Though Sun Pharma is valued much lower than RIL at Rs 2.11 lakh crore, by virtue of the higher promoter holding of 63 per cent against Mukesh Ambani’s (MDA's) 45 per cent RIL stake, Shangvi has become the richest man in the country.
Shangvi, though, has fewer co-shareholders to cheer for him. Sun Pharma has 163,308 small shareholders and TCS a slightly better number at 615,661. Even put together, they account for less than a third of RIL’s 2.77 million shareholder army. It is like the difference between New Zealand winning the World Cup and India doing a repeat.
Will Reliance continue to lose more crowns -- not that it has many left -- as it gets embroiled in controversies around the KG-D6 block, corporate espionage probe, etc? Or, will it stage a comeback to reclaim all those lost crowns? What a breathtaking, market-breaking and popular rally it would be. The problem with such crystal gazing is that some seemingly obvious things can take longer to materialise than your capacity to wait. At least, it appears that things might get worse before MDA comes back to do an MSD.
However, there are ominous signs of my wait getting over in the adjacent real estate market. The State Bank of India decision to do a mass e-auction of some 300 distressed properties worth Rs 1,200 crore changes the dynamics of the market, artificially holding up prices, completely. More state-owned lenders are following suit; an advertisement of Hudco selling 81 apartments of a Nagpur-based developer was doing the rounds in the social media.
Lenders seem to be finally acting in the way they should have long ago. Not a small credit for this should go to Reserve Bank Governor Raghuram Rajan, who has been regularly speaking his mind about crony capitalism and easy money. Rajan, who called the Greenspan game in that famous Jackson Hoel presentation a decade earlier, would not want his tenure to be found guilty of encouraging an easy money-fuelled realty bubble, sustained by artificial constraints to supply. Let the cartel be broken. Let us go buy some cheap houses.
