On March 23, when the stock markets hit the rock bottom, the m-cap of RIL stood at Rs 5.6 lakh crore.

By Urvashi Valecha

The market capitalisation of Reliance Industries (RIL) is now greater than the combined m-cap of the country’s top two private banks — HDFC Bank and ICICI Bank. The change shows a distinct shift in the market’s leadership position in a post-Covid world.  The combined m-cap of the two banking giants on January 31 stood at Rs 10.11 lakh crore, while that of the oil-to-telecom conglomerate was at Rs 8.95 lakh crore. At Thursday’s market close, the m-cap of RIL was Rs 10.01 lakh crore, while the combined m-cap of HDFC Bank and ICICI Bank was at Rs 7.75 lakh crore.
The banking sector has been beaten down on asset quality concerns as the lockdown has hit both retail and corporate borrowers hard. Following the January highs, the markets saw a broad-based sell-off due to the Covid-19 pandemic and the economic uncertainties that came with it.

Deven Choksey, MD, KR Choksey Investment Managers, said, “On the one hand, this shows one company (RIL) that has seen a range of deals and value unlocking which led to the surge in its market cap, on the other, there are companies bearing the brunt of the economic situation in the country, and so, have been beaten down badly.”
On March 23, when the stock markets hit the rock bottom, the m-cap of RIL stood at Rs 5.6 lakh crore. The combined m-cap of HDFC Bank and ICICI Bank stood at Rs 6.06 lakh crore on March 23. After a series of deals announced by RIL for Jio Platforms, the company has been re-rated and it’s showing in the stock price.

Naveen Kulkarni, chief investment officer, Axis Securities, is of the view that since the nature of the two businesses were very different, they were not comparable, . Traditionally, the m-cap of RIL has been lesser than that of the combined m-cap of HDFC Bank and ICICI Bank, barring for a small period between September 2018 and October 2018. According to Kulkarni, the fluctuations in m-cap do not point towards any large structural change.

“The fluctuation in m-cap does not really point out to any structural change in the markets as such or even in the leadership. For instance, Kotak Mahindra Bank is one of the most expensive banks in terms of market value. As for RIL, the telecom business has not been affected by the current economic situation as such, even Vodafone Idea is seeing demand, so, it is a change in preference and demand,” he said.

Going ahead, market experts say the difference between the m-cap of the three will depend on various triggers. Deepak Jasani, head – retail research, HDFC Securities, said, “The m-cap difference will depend on triggers returning for financials and RIL’s stock performance hereon. Sectors come into demand and then their lure fades away. All the three stocks are among the top performers and holdings of most institutions.”