Ups and Downs of Sensex

SENSEX is regarded as the pulse of the domestic stock markets in India. In this article we shall see the history of Sensex the ups and downs of Sensex. Journey of Sensex till 20,000 back to 8,000 and again 21,000. We shall also see some of the biggest one day (intra day) falls. We shall also look at Foreign angle that of Foreign Institutional Investors (FIIs) and talk about Future prospects.

Sensex

Most of the trading in the Indian stock market takes place on its two stock exchanges: the Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE). The BSE has been in existence since 1875. The NSE, on the other hand, was founded in 1992 and started trading in 1994. BSE SENSEX, also called the BSE 30 or simply the SENSEX, is a free-float market capitalization-weighted stock market index of 30 well-established and financially sound companies listed on Bombay Stock Exchange (BSE). The 30 component companies are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy. Published since January 1, 1986, the SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX is taken as 100 on April 1, 1979, and its base year as 1978-79. Our article Stock Market Index: The Basics talks about . What is index? How is it calculated? Wikipedia Sensex  is a good reference.

The historical data of SENSEX and other BSE indices can be obtained from BSE  Indices Historical Data

BSE Historical Data

BSE Historical Data

Data from 1991 to Sep 2012 from BSE is as follows:

Sensex from 1991 to Sep 2012

Sensex from 1991 to Sep 2012

Data from 1997 to Sep 2012 when plotted by Yahoo Finance appears as follows from

Sensex from 1997

Sensex from 1997

Sensex Milestones

 Milestone  Date  Description
100  Apr 1, 1979 Base value of Sensex
1000 July 25, 1990 SENSEX touched the four-digit figure for the first time and closed at 1,001 in the wake of a good monsoon and excellent corporate results
2000 January 15, 1992 SENSEX crossed the 2,000-mark and closed at 2,020 followed by the liberal economic policy initiatives undertaken by the then finance minister and current Prime Minister Dr Manmohan Singh.
3000 February 29, 1992 SENSEX surged past the 3000 mark in the wake of the market-friendly Budget announced by Manmohan Singh.
4000 March 30, 1992 SENSEX crossed the 4,000-mark and closed at 4,091 on the expectations of a liberal export-import policy. It was then that the Harshad Mehta scam hit the markets and SENSEX witnessed unabated selling.
5000  October 11, 1999 SENSEX crossed the 5,000-mark as the Bharatiya Janata Party-led coalition won the majority in the 13th Lok Sabha election
6000  February 11, 2000 Ihe information technology boom helped the SENSEX to cross the 6,000-mark and hit and all time high of 6,006.
7000 June 21, 2005 News of the settlement between the Ambani brothers boosted investor sentiments and the scrips of RIL, Reliance Energy, Reliance Capital and IPCL made huge gains. This helped the SENSEX crossed 7,000 points for the first time.
8000 September 8, 2005 SENSEX crossed the 8000 level following brisk buying by foreign and domestic funds in early trading.
9000 December 9, 2005  SENSEX on November 28, 2005 crossed 9000 to touch 9000.32 points during mid-session at the Bombay Stock Exchange on the back of frantic buying spree by foreign institutional investors and well supported by local operators as well as retail investors.
10,000 February 7, 2006 SENSEX on February 6, 2006 touched 10,003 points during mid-session. The SENSEX finally closed above the 10,000-mark on February 7, 2006.
11,000  March 27, 2006 SENSEX on March 21, 2006 crossed 11,000 and touched a peak of 11,001 points during mid-session at the BSE for the first time. However, it was on March 27, 2006 that the SENSEX first closed at over 11,000 points.
12,000  April 20, 2006 SENSEX on April 20, 2006 crossed 12,000 and touched a peak of 12,004 points during mid-session at the BSE for the first time.
13,000  October 30, 2006 It touched a peak of 13,039.36 and finally closed at 13,024.26.It took 135 days for the Sensex to move from 12,000 to 13,000 and 123 days to move from 12,500 to 13,000.
14000  December 5, 2006 SENSEX on December 5, 2006 crossed 14,000. It took 36 days for the Sensex to move from 13,000 to the 14,000 mark.
15,000  July 6, 2007  SENSEX on July 6, 2007 crossed 15,000 mark.It took seven months for the Sensex to move from 14,000 to 15,000 points.
16,000 September 19, 2007
17,000 September 26, 2007
18,000 October 9, 2007  It took just 8 days to cross 18,000 points from the 17,000 mark.
19,000 October 15, 2007  The index gained the 1,000 points in just four trading days.
20,000 December 11, 2007 Sensex actually crossed the 20,000-mark on October 29, 2007 during intra-day trading but closed at 19,977.67 points. However, it was on December 11, 2007 that it finally closed at a figure above 20,000 points on the back of aggressive buying by funds.
21,000 Jan 08, 2008  SENSEX on January 8, 2008 touched all time peak of 21078 before closing at 20873.
 November 5, 2010  SENSEX on November 5, 2010 closes at 20,893.6 with highest peak in two years.

Sensex fall from 21000 to 8000

Sensex fell from 21,000 on Jan 21, 2008 to hit 7,697.39 and end at 8,509.56 on Oct 27, 2008. From Yahoo Finance Jan 2008 to Dec 2008 the chart of fall is as follows

Sensex fall from 20,000 to 8,000 in 2008

Sensex fall from 20,000 to 8,000 in 2008

Jan 21, 2008 Sensex saw its highest ever loss of 1,408 points at the end of the session on Monday. The Sensex recovered to close at 17,605.40 after it tumbled to the day’s low of 16,963.96
Jan 22, 2008:  The Sensex saw its biggest intra-day fall on Tuesday when it hit a low of 15,332, down 2,273 points. However, it recovered losses and closed at a loss of 875 points at 16,730
Mar 17, 2008 Sensex below 15000 and ended at 14,810
Jun 24, 2008 Sensex went below 14000 and on Jun 27 2008 ended at 13,802
Jul 1, 2008 Sensex went below 13000 to end at 12,962.
Oct 6, 2008 Sensex went below 12000 to end at 11,802.
Oct 8, 2008 Sensex went below 11000 and ended on Oct 10 2008 at 10,527.
Oct 17, 2008 Sensex went below 10000 to end at 9,975.35
Oct 24, 2008 Sensex went below 9000 to end at 8,701.07
Oct 27, 2008  Sensex touched 7,697.39 and ended at 8,509.56

Sensex’s trek back to 18000:

After touching a low of 7,697.39 on Oct 27,2008  Sensex slowly recovered to touch 21,000 on Nov 5 2010. The chart of journey from 8k to 21k by Yahoo Finance Jan 2009 to Sep 2012 is as follows

Sensex trek back from 8000 in 2008

Sensex trek back from 8000 in 2008

Oct 27, 2008 Sensex touched 7,697.39 and ended at 8,509.56
Oct 28, 2008 Sensex crosses 9,000 to end at 9,008.08
Nov 3, 2008 Sensex crosses 10,000 to end at 10,337.68 but only from Mar 26,2009 when sensex closes at 10,003.10 does it resume it’s upward journey
Apr 15, 2009 Sensex crosses 11000
May 4, 2009 Sensex crosses 12000
May 19, 2009 Sensex crosses 13000 as Sensex salutes Manmohan’s Singh return to power. Soon it also surpasses 14000-mark
Jun 4, 2009 Sensex crosses 15000
Sep 7, 2009 Sensex crosses 16000 to end at 16,016.32
Sep 30, 2009 Sensex crosses 17,000 to end at 17,126.84 again crosses on Jun 3 2010
Jul 12, 2010 Sensex crosses 18000 for second time (after Apr 2010)
Sep 13,2010 Sensex crosses 19000 to end at 19,208.33
Nov 5, 2010 Sensex crosses 21,000 to hit 21,108.64 and end at 21,004.96

Ref: Moneycontrol : Rise and Fall of Sensex

Quoting from Hindu  Sensex suffers 12th biggest fall since 2008 and Rediff Biggest falls in Indian stock market history Here are the  biggest single-day falls of the Sensex

Date Sensex Fell by Reason
Jan 21, 2008  1,408.35 Sensex plunged by 1,408.35 points — the biggest one-day loss so far — due to deepening global economic worries.
Oct 24, 2008    1070.63 Sensex lost 1070.63 points after RBI lowered its GDP growth forecasts on global economic concerns.
Mar 17, 2008  951.03  Sensex dropped by 951.03 points on the global credit crisis and distress—sale of US banking major Bear Stearns.
Mar 3, 2008  900.84 The Sensex lost 900.84 points on concerns emanating from growing credit losses in the US.
Jan 22, 2008  875 Intraday movement more than 2000 points down at one point. Trading was suspended due to the ferocity of the fall. In the evening, news breaks that American Federal Reserve reduced interest rate by 75 bps fearing the US market collapse at open.
Jul 6, 2009  869.65 The index plunged by 869.65 points on the day of Union Budget presentation in Parliament on concerns over high fiscal deficit. This was the biggest Budget-day loss for the Sensex
Feb 11, 2008  833.98 The market benchmark lost 833.98 points on a day when Reliance Power fell below its IPO price in its debut trade after a high-profile public offer.
May 18, 2006  826  The Sensex registered a fall of 826 points to close at 11,391, following heavy selling by FIIs, retail investors and a weakness in global markets.
Oct 10, 2008  800.51 Sensex dropped by 800.51 points amid weak industrial production data and concerns over impact of global economic crisis on IT and banking firms in India.
Mar 13, 2008  770.63 The index plummeted by 770.63 points on global economic jitters.
Dec 17, 2007  769  A heavy bout of selling in the late noon deals saw the index plunge to a low of 19,177 – down 856 points from the day’s open. The Sensex finally ended with a huge loss of 769 points
Jan 7, 2009  749.05 The market barometer dropped by 749.05 points on a day when the Satyam fraud came to light.
Mar 31, 2008  726.85 The index shed 726.85 points after heavy selling in blue-chip stocks on global economic fears.
Oct 6, 2008  724.62 The index went spiralling down 724.62 points amid fears of the US recession and attempts by governments across the world to save their failing banks.
Sep 22, 2011  704 The Sensex lost 704 points on fresh fears of a global economic slowdown and a fall in rupee value to lowest in two

CapitalMind Best month for nifty since May 2009 has a very colorful chart with monthly returns since 1979. One of the reasons for the rise, fall, rise of the Stock markets is Foreign Institutional Investors (FII),  so let’s learn a little more about them

Foreign Institutional Investors (FII)

FIIs (Foreign Institutional investors) refers to entities (banks, insurance companies, mutual funds etc) registered in a country other than in which they are investing. For e.g. a US Mutual Fund which invests in the Indian Stock Market. FIIs usually pool large sums of money and invest those in securities, real property and other investment assets. As bulk of their investments are in the stock market, they affects the stock market movement significantly.

FIIs are on the lookout for investment opportunities which could give them better rates of return. Emerging markets like India, China, Brazil have been growing at a greater pace than other developed countries and subsequently offer better opportunities for the FIIs. But FII also have the potential to create chaos in the stock market. FIIs tend to exit the stock markets prompted by profit booking or negative events like liquidity concerns, fears of a crisis etc as we saw in 2008. With the Sub Prime Crisis in US, liquidity crunch or a preference to sit on cash led to a situation where many FIIs booked profits and pulled out their money. As more and more money was pulled out, it further depleted the investor confidence and the stock market tumbled to 8000 levels. Chart from Moneyworks4me Understand the FIIs movement & earn profits in the Stock Market  shows correlation between FDI and stock market

FII and stock market correlation

FII and stock market correlation

Quoting from Investopedia :An Introduction To The Indian Stock Market India started permitting outside investments only in the 1990s. Foreign investments are classified into two categories:

  • Foreign direct investment (FDI) :All investments in which an investor takes part in the day-to-day management and operations of the company, are treated as FDI
  • Foreign portfolio investment (FPI). , whereas investments in shares without any control over management and operations, are treated as FPI.

For making portfolio investment in India, one should be registered either as a foreign institutional investor (FII) or as one of the sub-accounts of one of the registered FIIs. Both registrations are granted by the market regulator, SEBI. The government of India prescribes the FDI limit and different ceilings have been prescribed for different sectors. Over a period of time, the government has been progressively increasing the ceilings.  As per Statistics of FDI investments in India (pdf) the figures are as below:

FDI figures from 2000 - Mar 2012

FDI figures from 2000 - Mar 2012

Understanding Sensex

In 1991 and 1999, the stocks markets rallied mainly due to liberalisation in early 1990s and tech mania in early 1999. From a level of around 2950 in April 2003 it went up 7 times to around 21200 in Jan, 2008. This rise was unprecedented. This created lots of wealth for a selected group of investors and even attracted some investors who had kept away from stock market all through their life. Just when experts started talking about the rise of Sensex to level of 25000 levels, global recession hit stock markets badly. In barely six months time, Sensex came down to 8000. And it is slowly crawling to 18,000+ levels. We are often told that Sensex gives double digit returns , the only asset class that beats inflation. Capital Mind in The Great Indian Stock Market Story was only 5 good years says Nearly all of the growth in India’s markets were between 2003 and end 2007. If you remove this period from the market, the rest has given substandard returns. Of course individual stocks have given great returns. But if you weren’t part of the great part of the story, you probably don’t like the markets too much.

“Equity gives good returns in long term” but how long is long term – 5 years, 10 years. Jagoinvestor Worst 5 yr period in Stock markets – Are you happy with your Investments ? shows  for Nifty (results are similar for Sensex) So is timing in the market important?

Nifty 10 years return 2002-2012

Nifty 10 years return 2002-2012

Rolling Returns of Sensex  HDFCFund:Sensex rolling return calculator can calculate rolling returns of Sensex from any date between 03 Apr 1979 to 30 Aug 2011. Using the calculator summary of Rolling returns from 1st Apr 1997 are as shown in picture below. For details click here 

 

Rolling returns summary from Apr 1997 to Mar 2012

Rolling returns summary from Apr 1997 to Mar 2012

In our article Comparison of Fixed Deposits and Sensex Returns  we presented varied views on comparison of Fixed Deposits and Sensex Returns. Comparison of Fixed Deposit rates and Sensex is shown below:

Fixed Deposit Sensex Annual Returns

Fixed Deposit Sensex Annual Returns

Future prospects of Stock markets

Indian economy is passing through a tough phase in spite of the robust growth . The rate of inflation is  high and this has forced RBI to increase repo and reverse repo rates several times. High interest rates have hit the performance of corporate sector in India. Also high interest rates have attracted investors to park their funds in bank deposits and other kinds of debt.  Though global recession is over, crisis in Europe (Greece,Spain) has kept global investors away from Indian markets. The pace of reforms in India slowed down and the government did not come out with significant policy changes(or flip flopped) till Sep 2012. The sense of optimism was missing in Indian stock market and it looked that investors are not very confident about the performance of stock market.

Related Posts :

So once the issues are resolved, as Govt showed by reform measures in Sep 2012, will the markets grow fast, at the same pace as they did in 2003-07 phase? How much return will Stock market give in future?

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