Wednesday, October 20, 2021

Encapsulating The Exceptional Journey Of Sensex

The concept of capital markets was introduced in India in late 1875 as the Bombay Stock Exchange or more commonly known BSE, was established as India’s premier stock exchange. From there to 2021 when Sensex has attained whopping heights, making mighty waves in the trade market, the journey has been nothing short of outstanding. 

To put it on a platter for the greater audience, the S&P BSE SENSEX (S&P Bombay Stock Exchange Sensitive Index), also called the SENSEX, is the benchmark for India’s stock index, constituting 30 of the most reputed stocks on the Bombay Stock Exchange. The SENSEX debuted on April the 1st, 1979 with the base value amounting to a mere 100 points. In 1985, BSE started publishing Sensex values. By then, the index had already crawled up to 400 marks.

Some of the prominent listed companies on SENSEX include Reliance Industries, HDFC Bank, Infosys, ITC, TCS, Tata Motors, and the like.

The last 40 years of Sensex have been nothing short of a miraculous roller coaster. From the value of mere 100 points to an all-time high of 50,000+ points recently on Jan the 21st, 2021, this is an exemplary growth story for any trading market. When the news broke in on February 3rd about Sensex crossing the 50,000 mark, the market made itself a significant room in history. This is especially significant as the boost came in after a distressed economy ailing due to the COVID-19 outbreak. 

The journey of Sensex’s upward graph

90’s Timeline

After the period of 110 years, the SENSEX finally crossed the 1000 mark in 1990. However, what followed later is more noteworthy. It took the index less than a year to marched past the next 3,000 after 1990. Soon after, the infamous and much talked about Harshad Mehta scam came in the limelight in the year 1992 and BSE crashed by 12.77%. This was the time when not only the Sensex made huge bounds in both directions but also highlighted the need to introduce major reforms in trading and settlement of securities. 

This was also the period when the Indian stock market underwent the first wave of liberalization reforms in the investment industry, eventually boosting competition and returns.

The rise & fall of SENSEX from its base value of a 100 points, all the way to 50,000 points can be seen below.

It took 7 years till 1999 for the Sensex to scale from 4,000 points to 5,000. This period was heavily characterized by major advancements in various sectors such as information technology. The newly introduced stocks of the companies like Infosys Ltd and TCS Ltd. proved to be the biggest thrust to both, the Indian IT sector and the stock market.

21st Century timeline 

The first major highlight after 2000 was after the Lok Sabha election results. With the victory of the Congress party, SENSEX dipped by 15.52% in May 2004.

However, soon the ray of optimism rescued the market. The next lot of boom in the SENSEX was introduced by the expansion of the Chinese commodity market in the year 2006. 

In 2007, SENSEX finally the big 20,000 mark for the first time in December due to global liquidity brought by the global housing crisis. The optimism was short-lived as the housing crisis soon evolved into the major global financial crisis of 2008. One of the biggest financial crises was witnessed by the Indian investors on January 21, 2008. The day was termed Black Monday and the Bombay Stock Exchange suffered a fall of 1408 points

The next big setback was witnessed by the SENSEX during demonetization when the index crashed by 1689 points. This was due to panic selling due to a currency ban. 

However, the biggest of all the crashes for the SENSEX came across in 2020 when the global outbreak of COVID-19 shut down the world. SENSEX lost 1448 points

Fortunately, the lockdown period, which spelled the biggest crash by 3935 points, was the lowest the SENSEX could go before it soared to exceptional heights. The Indian stock market unexpectedly outperformed the forecast of experts and was soon treading on an upward graph at an accelerating pace. 

This pace received the biggest thrust after the Finance Minister of India, Nirmala Sitharaman introduced the Union Budget 2021, which put the SENSEX on the historical pedestal of 50,000+ mark. 

Sensex is 500 times what it is used to be during the inception!

If one had invested in heavily weighted shares listed on SENSEX forty years ago, the returns could be much higher than that of a fixed deposit scheme or even investing in gold. Putting it in an example, if one were to have invested Rs.10,000 in 1979, then its bank fixed deposit would be Rs.2,68,114 in today’s value while its value in gold would be Rs.4,08,474. Had this sum been invested in market-weighted shares listed on the SENSEX, the return would be Rs.45,28,568 in today’s rupee value. From the period 1979 to 2020, SENSEX exhibited a compounded annual growth rate (CAGR) of 16.1%. 

Considering the total return index, it will be well over 17%. In the same period, commodities like gold have given 10% return on rupee. The SENSEX has given a CAGR of over 17% over the last 40 years which is the highest ever return given by any asset class in India. It is truly a reflection of growth of India over all these 40 years.

Analysts suggest that looking at the chart of SENSEX since its inception, it’s quite evident that when India smiles, the Sensex also smiles, and when India cries, the Sensex cries too. It is a true witness and representation of India’s triumphs and struggles, its hopes as well as inhibitions. It is the symbol of India’s ambitions and it will continue to support and guide India’s future generation like it has done so in the past.

Siddharth Kulkarni
Siddharth is an incoming FMV Analyst and B.Com Hons graduate from Delhi University. Siddharth holds several positions of authority at a college level at various societies namely The Young Entrepreneurs Society and The Hult Prize. He is an enterprising youngster who is passionate about learning and growing as a person with each successive day. He is a hardworking and self-confident individual who possesses zeal and grit and loves to work with details. Being a sportsperson as well as an academic achiever, he love to surround himself with healthy competition.

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