After resisting the repeated exhortations of your friends to invest in the stock market, you finally decide to take the plunge. But I don’t know anything about stocks, where should I invest? Don’t worry, your wise friends counsel you, just stick to quality companies, and you will be fine. Also, they add solemnly, don’t look for quick profits, have a long-term horizon.
Great, thanks! You then do some research and zero in on three blue-chips—India’s largest FMCG firm, largest IT company, and biggest paints manufacturer—all market leaders with diamond-grade pedigrees.
You also resist the urge to frequently check your portfolio. Equity investing, you remind yourself, is a long-term game.
Some three years have passed. Last weekend, you finally opened your brokerage account to see how your investments are doing.
And immediately receive the shock of your life.
HUL has inched up around 3%, TCS 6% and Asian Paints around 2% in three years. The CAGR of your portfolio is not even 2%.
Your father, who has an enduring romance with bank fixed deposits, has a wicked smile on his face as he flaunts his FD returns of 7%. And your mother, who believes in only God and gold, has outperformed both of you combined, with her little bundle of ornaments tucked away in the almirah nearly doubling in value.
What went wrong?
The hardest part of investing is not evaluating a company’s current standing but making an intelligent guess about its future course. Changes in the competitive landscape or sudden innovative breakthroughs can deal a body blow to risk-averse incumbents. Which is something a lot of India Inc’s stalwarts are grappling with at the moment.
The rise of digital-first consumer brands, the slowdown in urban consumption, and the strong showing by local players in tier-II markets are making it hard for HUL to grow its volumes. The aggressive entry of challengers is eating away at Asian Paints’ market share. The emergence of AI and other technologies of tomorrow risks upending the entire business model of Indian IT outsourcers, including TCS.
Underlying all these cases is a fundamental factor – if you are a company with a huge market share, you will be the first in line of fire when new players arrive hungry for a slice of the pie, or there is an industry-wide disruption. Which means a large size is inherently vulnerable.
Unless you are Reliance Industries.
As our Long Story explores this week, RIL is a rare breed in corporate India–a company which is both huge and nimble.
RIL has been on a multi-year journey to transform itself from a petrochemicals giant to a consumer behemoth. That Herculean effort is now bearing fruit. FY25 marked a turning point for RIL as its consumer businesses of telecom and retail accounted for more than half its Ebitda.
While its mainstay business of oil to petrochemicals (O2C) is facing margin compression due to global demand headwinds, Jio and Reliance Retail are aggressively scaling up their industry dominance.
Waiting in the wings is its newest bet—the new energy vertical, comprising segments like solar and wind power, fuel cell, battery, electrolysers, and others, not to mention other businesses like media and entertainment.
The market is taking note of the transformation. After severely underperforming the Nifty in 2023 and 2024, and barely matching the benchmark in the two years prior to that, RIL has roared back to life this year, climbing around 24% compared to a 7% rise in the Nifty.
While it is difficult for large-caps to make outsized moves, RIL finds a way to reward the faithful. The demerger of Jio Financial Services is a case in point, with its shares vaulting around 50% since its demerger in mid-2023. (RIL shareholders received one share of Jio Financial Services for every share held in the parent company.) Buzz around a similar demerger of its consumer verticals is adding to the strong buying interest in the stock.
Even in its traditional O2C business, many analysts say the worst is behind, as fuel cracks are inching up from multi-year lows.
One stock giving exposure to so many sectors is a unique phenomenon, not only in India but also globally. Imagine investing in Shell + Verizon + Walmart, and a few more businesses through a single company.
A huge size can hamper companies from reinventing themselves, but that’s usually true only for those that grow lethargic and fail to read the music in the room. But as RIL is demonstrating at the moment, some giants can both waltz and go on a rampage.
