In today’s story, we look at one of the most talked-about calls in Indian markets this year — a global brokerage quietly dropping India’s most valuable company from its portfolio and replacing it with a supermarket chain.
Quick disclaimer before we begin. Stocks or sectors mentioned here are only for context and not investment advice. Please do your own research or consult a registered financial advisor before investing.
Now onto today’s story.
The Story
Imagine you are a fund manager at one of Asia’s most influential brokerages. You have held Reliance Industries in your India model portfolio for years. It is the country’s largest company by market cap, run by one of the world’s wealthiest people, with fingers in oil, retail, and telecom. And then, in January 2026, you quietly drop it.
That is exactly what CLSA did.
CLSA removed Reliance Industries from its India focus portfolio and replaced it with Avenue Supermarts — the parent company of DMart — and Eternal. The move was not loud. There was no press conference. But markets noticed. Reliance shares fell over 5% in a single session, clocking its steepest single-day drop in eight months.
So what exactly made CLSA walk away from Reliance?
The short answer is the retail business. Reliance Retail, the segment that was supposed to be the next big growth engine, has been sputtering. In Q3 FY26, the retail arm’s EBITDA grew by just 1% year on year. Retail EBITDA margin fell to 7.06%, the lowest level in 13 quarters. The company’s overall profit was nearly flat at ₹18,645 crore, barely moving from the same quarter a year ago.
To put that in plain terms: India’s biggest company posted a profit that grew less than you’d earn putting money in a fixed deposit.
Part of the blame goes to the rollout of new labour codes, part of it to weaker-than-expected consumer demand in urban areas, and part of it to GST rate rationalisation that compressed margins. Reliance Retail’s revenue did grow about 9% year on year, but the market was looking for more. When a company of this size delivers a growth rate that a smaller, leaner player would comfortably beat, investors start asking harder questions.
And then came the Russian crude controversy.
In January 2026, Bloomberg reported that three tankers carrying Russian crude were headed to Reliance’s Jamnagar refinery. This was a problem because US sanctions made Russian crude purchases politically sensitive. Reliance publicly denied the report, calling it “blatantly untrue.” But the damage to sentiment was already done. Foreign investors, already nervous about geopolitics and rising crude prices from the Iran war, had one more reason to trim their positions.
By early 2026, nearly ₹3 lakh crore had been wiped off Reliance’s market capitalisation.
But here is where the story gets more interesting.
CLSA did not just exit Reliance. It made a deliberate bet on a different kind of India consumption story. The brokerage’s thesis for 2026 is built around what they are calling “coiled springs” — companies that have been consolidating quietly and are poised for the next growth phase. DMart fits that description.
The DMart story is built on a model so simple it almost looks boring. You walk into a DMart store. Everything is cheap. The store is no-frills. There are no flashy window displays. Private-label products sit next to national brands, often priced 40% to 50% lower. The company owns most of its stores rather than leasing them, which keeps fixed costs predictable over time. And it is expanding aggressively, aiming to grow its store count by 15% to 20% annually, with management reportedly having visibility for up to 2,200 stores.
CLSA has gone on record with a “high conviction” view that DMart shares could rise by around 60%.
So is the CLSA call a sure thing?
Not quite. The analyst community is sharply divided on DMart. Of the 29 analysts covering the stock, only 10 recommend buying, while 11 suggest holding and 8 advise selling. The average analyst price target is considerably lower than CLSA’s bullish projection.
The concerns are real. DMart is expanding aggressively, and that expansion will keep free cash flow negative or minimal in the near term. Competition from Reliance Retail itself — which despite its stumbles remains a formidable force — and the rapid rise of quick commerce players like Blinkit and Swiggy Instamart continue to eat at the convenience segment. And then there is the leadership change: a new MD and CEO took over on April 1, 2026, which always brings a period of recalibration.
CLSA’s counter to the quick commerce threat is worth noting. Their research projects that quick commerce will account for less than 20% of urban consumption even by 2035. In other words, the physical store is not going away anytime soon. Most of India still shops in person, and DMart’s pricing advantage keeps bringing people through the door.
What does this mean for you as a reader thinking about how markets work?
The CLSA switch tells you something important about how institutional money thinks. It is not just about whether a company is good. It is about whether the stock is at the right price for the right moment. Reliance may well deliver on its new energy bets and the long-awaited Jio IPO. But institutional investors are asking: if the next two to three years are going to be choppy, which businesses have the least complexity and the clearest earnings visibility?
A company selling groceries cheaply in tier II cities looks a lot more predictable right now than a conglomerate managing an oil refinery, a telecom network, a quick commerce push, solar giga factories, and a potential IPO, all at the same time.
That is not a criticism of Reliance. It is a reflection of what the market finds comforting when the world outside feels uncertain.
The Iran war, crude oil swinging between ₹90 and ₹115 a barrel, and the India VIX doubling in a month — these are not small things. When the environment is volatile, smart money often moves toward simplicity.
Which raises the real question worth sitting with.
If a company as large and as dominant as Reliance can be quietly dropped from a brokerage’s model portfolio because one segment disappointed for two quarters, what does that tell you about how much of a stock’s price at any given moment is actually about the business, and how much is just about expectations?
Until then…
If this helped you think more clearly about how institutional money moves, share it with someone who follows markets.
This article is for educational purposes only. Not investment advice.
Happy Investing 😎
Nataraj Malavade Investor, Trader, Author & Mentor
www.natarajmalavade.in
| # |
Publication |
Article |
Link |
| 1 |
Business Standard |
RIL shares drop 5%, log steepest drop in 8 months after hitting a high |
Read |
| 2 |
Whalesbook |
CLSA Dumps Reliance, Bets on DMart for 2026 India Growth |
Read |
| 3 |
Whalesbook |
RIL Shares Fall 3% on Muted Q3 as Retail Arm Underperforms |
Read |
| 4 |
Multibagg AI |
Reliance Stock Wipes Out ₹3 Lakh Crore in 2026: What’s Next? |
Read |
| 5 |
Swastika Investmart |
Reliance Q3FY26 Results: Revenue, EBITDA, Margins |
Read |
| 6 |
Free Press Journal |
Reliance Industries Reports Nearly Flat Q3 Profit At ₹18,645 Crore |
Read |
| 7 |
Indian Retailer |
DMart Prioritises Store Expansion Over Near-term Cash Flows |
Read |
| 8 |
Whalesbook |
DMart Stock Jumps on CLSA’s High Rating, Analyst Split Persists |
Read |
| 9 |
Whalesbook |
DMart’s Bold Expansion: Will Store Growth Boost Long-Term Cash Flow? |
Read |
| 10 |
The Every News |
DMart Share Price Sees Significant Surge in Latest Trading Session |
Read |
