Underperformance of Reliance Industries

Reliance Industries Limited (RIL), India’s largest company by market cap has been a laggard for a while now.  After touching its lifetime high of Rs 2,369 in September, it’s now down by almost 17 per cent. Nifty 50, during the same period, went up by 27 per cent; thus, in total, Reliance Industries has underperformed by almost 44 per cent in the last three and a half months. This underperformance should be viewed on the back of the 165 per cent rally that we saw in the stock between March and September 2020.     

The initial outperformance was achieved after the value unlocking in its telecom and retail business. There was a spat of deal that helped the company to raise around Rs 1.52 lakh crore from tech giants such as Google, Facebook, and others in return for about 33 per cent of its share in its telecom segment. After such a deal, the shares of Reliance Industries were priced for perfection and Q2FY21 numbers were not so great and even the valuation was high. There was also a report by Macquarie (which gave an 'underperform' rating on RIL) while remaining cautious on the stock, going ahead. The global brokerage has set a price target of Rs 1,320.  This gave the mutual fund schemes an opportunity to book profit in the stock. Fundamentally also, we do not see any reason why it will start moving again and start outperforming.    

Smart investors like mutual funds have been unloading RIL’s share since September 2020.  According to data by RupeeVest, there are 418 funds (including passively managed such as ETF & index fund) that held RIL’s share at the end of November 2020.   

 Number of RIL shares held by mutual funds  

The table above shows that between August and November 2020, mutual fund schemes in total have reduced their holding by 1.66 crore.  

There are some funds that have raised their allocation towards RIL while some have drastically reduced it. There are 74 MF schemes that have increased their stake in RIL in the last one month, while there are 161 funds that have reduced their stake in RIL. There are some funds such as Kotak Standard Multicap and HDFC Hybrid that have kept it constant.  

Following is a list of the top 5 funds that have increased and decreased their stake in RIL in the last one month.   

The top 5 funds that have decreased their stake in RIL are:   

The top 5 funds that have increased their stake in RIL are: