Tuesday, December 13, 2011

Infosys pips Reliance to No. 1 weightage in benchmark indices

With the freefall of Reliance Industries continuing, its firm dominance in the Sensex and Nifty was loosened with Infosys replacing it as the most influential stock in both the indices.

Even though RIL, Coal India have greater market capitalization that Infosys, Infosys commands a weightage of 10.25 in Sensex in comparison to RIL's 10.08.

The reason is the method of valuing the benchmark indices. Both Nifty and Sensex follow the concept of free float market capitalisation. This translates to a market capitalization of all those shares that are owned by non-promoters. Since Infosys is not as closely held as other companies, its free float non promoter capitalization is the largest in India, now at Rs. 1.33 lakh crore pipping Reliance at Rs. 1.31 lakh crores.

Once considered the darling of investors, mutual funds, Reliance has been susceptible of its falling output in the KG basin, legal tussles with the Government. No new venture (eg. Reliance Fresh) has thrived, and the DE Shaw Joint Venture failed to attract the eyeballs. Also RIL has failed to convince investors of the optimum application of its idle funds, and all speculation of possible acquisitions have been doused.

The rupee deterioration in a way, has been beneficial to IT stocks that receive payments in dollars. If unhedged positions exist, or payment that is 'receivable' IT stocks make an instantaneous profit.

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