By Ruma Dubey

There was a time, few years ago, when the mood on Reliance counter decided the fate of the BSE. If the stock was down, surely the markets had to been streaked in deep red. There was a time when Dhirubhai was unwell and the markets feel. The joke around for many years after that was, “If Dhirubhai catches a cold, the market gets fever!”

But after some time, when he slowly but surely handed over the reins to his sons, this obsession came down, so much so that when he passed away, the markets did not exactly crash.  And since then, Reliance slowly but surely stopped being the only bellwether of the markets.

Every market has stocks which act as a bellwether; these are the stocks, one or two, which decides the mood of the markets.   The word “bellwether” refers to the practice of placing a bell around the neck of a ram, which led the flock of sheep. The movement of the flock was tracked by hearing the bell before the flock was in sight.  And the same meaning applies to the bellwether stock – the movement of the Sensex is tracked by the movement of this one stock.

For many years, General Electric was the bellwether for America and in India, it was undoubtedly, Reliance Industries. This logic is applicable in sectors also. Like Alcoa, the third largest producer of aluminum in the world is the bellwether of the economy because when it reports good earnings, it is considered to be a bullish signal for the stock market overall.

But today, neither of them are bellwethers. Maybe the economic barometers remain but when it comes to specific stocks, they have all changed. Yes, we have bellwethers but this is has become more day and stock specific. Like for eg: TCS was the bellwether yesterday when it was to declare its Q3FY16 performance. Or for that matter, Infosys today, ditto for Reliance and L&T on the day of their results.  ITC helped create more wealth for investors than Reliance in 2012; but do we ever feel that ITC is the bellwether of the market? It fell but each time it fell, the markets did not crash nor did the reverse happen when the stock rose. SBI, HUL, ONGC are all large cap stocks but neither of them, singularly, is the bellwether.

This also means that just because a company is large, it does not mean that it is the bellwether. Like Apple, which is today much bigger than Exxon Mobil, after it surpassed the latter as the most valuable company.  But yet, Apples gyrations alone on the exchange did not mean much; despite being so big, it could not influence the markets alone. Like Reliance here; its poor performance in the previous quarters was surely an overhang for some time but soon the market hung onto some other stock, some other results, some other news.

So yes, today we have a cluster of bellwethers when it comes to the stock market and each stock is probably the bellwether of its sector but not for the entire market, all by itself. Today, even the large caps, which are labeled as the bellwethers, move based solely on news. So if its Reliance aaj, it could be ITC kal. But yes, they essentially remain the bellwethers of their industries; like DLF for realty but not for the market or ACC/Ambuja for the sector, Ceat/Apollo for the tyre sector. KFA was a big market mover in aviation sector but since the time, it was grounded market has moved to a new mover – Jet. Undoubtdely though, SBI is the bellwether for the banking sector for sure and to  some extent, for the markets too because it’s good performance means that all is well in the Indian economy and vice versa when performance slips. So large companies which touch many other industries could have an influence, be the bellwether but even this is so temporary, ephemeral.

Markets never behave in a set pattern and to expect such companies to also behave in a set pattern would be naïve. Or else we all would have been multi-millionaires by now.