Reliance Industries (RIL) is not a darling of the trading community anymore. The stock which in the recent past lost its stature of the most valued scrip and saw a rise analyst downgrades, is witnessing a decline in its popularity amongst traders given a consistent fall in its ranking amongst the top traded stocks on domestic exchanges.
As per the latest data, the stock’s median rating amongst the top traded stock on the NSE, which accounts for nearly 80% of cash trading volume, is on a decline since 2011. Turn-over wise, RIL’s median ranking fell from the top traded stock in 2010 to the third in 2011 and further to the fifth position in 2012 so far. Particularly, in July 2012 RIL’s ranking plummeted to tenth as the stock clocked in a monthly turnover of Rs 3600 crore, its lowest in at least last four years as per Capitaline.
According to market participants, the stock’s consistent under-performance against the benchmark indices has started playing up on traders’ sentiment, especially since the last one year. RIL has underperformed the bluechip benchmarks like the Nifty and the Sensex, each year since 2007. In 2012 so far, the stock has yielded 15% against about 17% return given by both the benchmarks. ?The company’s struggle to maintain the core business efficiency which is affecting its financial performance and it’s inability to utilize its vast cash reserves in newer businesses have also dithered the traders’ interest,? said a trader.
These concerns according to him have affected the trading activity in the scrip in both the cash and derivatives segment even as the over-all market activity has also seen a descent. For example, the three-month rolling average open interest on the stock has declined from 1.5 crore shares at the beginning of 2011 to about 1.1 crore as of August.
As per NSE, during 2011-2012, RIL turned the third most traded stock, and accounted for 3.2% of the total turnover on the exchange, it’s lowest contribution since fiscal 2001. The RIL stock lost its status of the most valuable stock in December last year and since then has tumbled to third rank amongst the most valued companies of India on several occasion. At the end of August it has regained a second rank, after TCS.
In the current calendar year (CY12), at least ten brokerages have lowered their rating on RIL. Since January, Citi, Bank Of America Merrill Lynch (BofAML), J P Morgan, BNP Paribas, Daiwa Securities, and Kotak Institutional Securities, have all reduced their rating on the stock amongst others. However, last month Goldman Sachs said that RIL can become a $100 billion stock by 2016-17 owing to a potential to get re-rated as its core capex can lift the stock.