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D. Murali
Alagappan Arunachalam

A direct relationship between growth and erosion

Chennai , June 13

Between February 7 and June 6, Sensex crossed the 10,000-mark and returned.

Much like the bad penny, one may rue, not counting the dip on February 17 to the sub-10,000 level.

How did the Sensex companies perform during the period? Well, they accelerated and peaked, on different dates though, and suffered shaving off, like the rest of the market.

To find broad trends among the Sensex constituents, in the battle of erosion during the bear attack, we computed the growth percentages achieved by each of the 30 stocks, in comparison to their base values, that is, prices that ruled on February 7.

Gainers and losers

Top gainers, reckoning by growth percentages, were ACC, Tata, Grasim and Reliance Industries, with more than 60 per cent ascent.

In stark contrast, Hero Honda, ICICI and HDFC could manage less than 10 per cent growth between February 7 and the peak they could manage during the period under study.

Then came the big hit, wave after wave, eroding values and pulling down the blue chips from their peaks.

Utmost beating was taken by Reliance Energy, Hindalco, Grasim and ONGC, each registering more than 30 per cent decline from their highs, during February 7- June 6.

High & low

The X-Y scatter, with growth, optimistically on the Y-axis, and erosion on the X, has an interesting tale to narrate.

The `high growth, low erosion' quadrant is significantly vacant, as if to be compensated by the diagonally opposite one, `low growth, high erosion'.

However, the other two quadrants, `low growth, low erosion', and `high growth, high erosion,' seem to be equally populated.

Trend line, which is the best fit, suggests a north-eastern movement, implying a direct relationship between growth and erosion.

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