RIL to drive market for direction

RIL has been in the news for a while, so much so that it has remained a silent observer/spectator as other stocks rallied past. Thanks to the Ambanis tussle, RIL has been tied to a tree, but how long is the question, it has to move.

With RIL (Reliance Industries) board of directors recommending a 1:1 bonus share, the market is soon all set to take a precarious route. How would markets defy it would be something to gaze going ahead. With around 10% of the total market cap, RIL enjoys itself to be called the "Big Brother" for BSE, nevertheless it's the big brother which would decide which way the markets are headed.

We've seen many stocks which normally tend to take a northbound journey prior to the split/bonus and thereafter collapse beyond the readjusted market value after split. But, ofcourse there've been lot many others which have doubled, quadrupled after the split/bonus issue and never came back to those levels, people kept waiting indefinitely for the stocks to take a nosedive. Some of them were TCS (split around 4-6 months back). But L&T (split almost year back), Infy (split back in 2005-06 as far as I can recall) did offer the chance for many people to enter thanks to the global downturn they were beaten down to around 600 and 1100 respectively and both the stocks have doubled from there on.

In a long run of around 2-3 years, there's no doubt RIL would definitely give good returns, but it is more of a timing issue for someone who wants to enter into RIL at this juncture. If the RIL starts climbing from its current levels to a 2600-2700 or so, it'd pull along with it the BSE and the NIFTY as it happens to be the "Supreme" stock with a nice market-capitalization. But, once the markets get there to say 5400-5500 on the NIFTY, if they get there, the markets can do a wild swing. Which way it'd swing after the RIL bonus would be uncertain. If RIL takes a nosedive after split like other traditional stocks aggravated with the Honourable supreme court giving a hearing which is not in its favour, the markets would take a sharp cut as many are expecting the correction as well, sooner or later. If RIL continues to rise after bonus issue, we might see another wild runup from 5000 to 6000 on the NIFTY much like the post election result rally that everybody saw - "Left the left", left many people who still continue to carry a pain in them that they still are left out in the rally which looks like a straight line climb which is not at all falling.