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Power of Three: D-Street’s top guns beat total m-cap of 859 smallcaps

The recent stocks rally added so much muscles to the top three heavyweights – Reliance Industries (RIL), Tata Consultancy Services (TCS) and HDFC Bank – that their combined market-cap today tops that of 859 smallcaps in the BSE Smallcap index.

At Thursday’s close, the combined market value of the three heavyweights stood at Rs 24 lakh crore against nearly Rs 23 lakh crore m-cap of the BSE Smallcap index.

Shares of RIL advanced over 25 per cent year to date to trade at Rs 1,402 on Thursday, swelling market capitalisation of the oil-to-telecom behemoth to Rs 8.91 lakh crore from Rs 7.11 lakh crore on December 31 last year.

TCS and HDFC Bank gained 17 per cent and 11 per cent, respectively, during this period. TCS’ m-cap jumped from Rs 7.11 lakh crore to Rs 8.31 lakh crore and HDFC Bank’s from Rs 5.77 lakh crore to Rs 6.41 lakh crore.

The three firms have reported Street-beating financial results for March quarter, and most of the brokerages are bullish on them.

RIL last month reported a record net profit of Rs 10,362 crore for the quarter as robust revenue from retail and telecom businesses offset weakness in core oil refining and petrochemical segment. The profit figure stood at Rs 9,438 crore in the corresponding quarter last year. Centrum Broking is bullish on RIL with a target price of Rs 1,480.

IT major TCS posted a 17.7 per cent jump in consolidated net profit at Rs 8,126 crore for the March quarter. The figure stood at Rs 6,904 crore in the year-ago period. Ashika Stock Broking is positive on the stock with a price target of Rs 2,490.

HDFC Bank reported a 23 per cent profit growth at Rs 5,885.12 crore on healthy growth in net interest income. The bank had registered Rs 4,799.28 crore profit for the January-March quarter of 2017-18. Yes Securities has a ‘buy’ call on HDFC Bank with a target price of Rs 2,700.

The BSE smallcap index has added less than 1 per cent year to date, with 65 per cent of the components still in the red.

Share prices of Reliance Communications, LEEL Electricals, Mercator, Kushal and Siti Networks have tanked between 62 per cent and 88 per cent so far this year.

Others like Seamec (up 112 per cent), The Jammu & Kashmir Bank (up 61 per cent), Vipul (up 59 per cent) and Astrazeneca Pharma (up 58 per cent) have notched up stellar gains to cap the downside for the smallcap. The BSE Sensex is up 8 per cent year to date.

The cumulative market value of RIL, TCS and HDFC Bank was at nearly Rs 19.98 lakh crore on December 31, 2018 against BSE smallcap index’s combined market cap of Rs 22 lakh crore.

HDFC Bank and Reliance Industries scaled their fresh 52-week highs of Rs 2,376 and Rs 1,417, respectively, in Friday’s trade.

“The underperformance in the smallcap space could be attributed to high share pledging by promoters, liquidity crisis and a minor slowdown in the economy. Even a little slowdown hits the smallcap space badly,” said AK Prabhakar, Head of Research, IDBI Capital Markets.
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