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 (RIL) — India’s largest stock by market capitalisation — accounted for about 43 per cent of the benchmark Sensex’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 the 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, Google, and other giants. RIL now has a 17 per cent weighting on the Sensex, up from 10 per cent a year ago, and has propelled the measure up 50 per cent since the March low.
The weighting of RIL has also become a problem for the nation’s actively-managed funds as they hit a regulatory limit for holding a single stock. This means money managers can’t add rising stocks and therefore, risk trailing the market, according to Kotak Asset Management Co.