The Hindu Business Line : Friday, yet again lucky for Sensex

FRIDAY appears to have something special in store for the Indian stock markets. It was on Friday, February 11, 2000 that the Sensex moved past the 6,000-point mark for the first time before closing at 5,933.56

The BSE benchmark index has now breached the high of 6,150.29 again on a Friday. However, this time around, the index has managed to close above the 6,000-mark at 6,119.59. Incidentally, the Nifty too surpassed the life-time high of 1,818 on Friday, December 26, 2003.

However, the similarity between the peaks recorded in the year 2000 and now ends here. There have been quite a few changes since 2000 especially in terms of composition of the Sensex, the price-earnings multiple and weightage of the index constituents.

The Sensex is now traded at price-earnings (PE) multiple of about 20 as opposed to 26 in February 11, 2000.

However, the PE multiples are strictly not comparable as the Sensex has undergone significant changes in its constituents in the last couple of years. The weightage of the technology sector has declined from February 2000 levels while that of oil and gas has increased significantly. In terms of change in constituents, Zee Telefilms, ONGC, Wipro and Bharti Tele-ventures are the prominent companies that have been included in the index at the expense of Castrol, Colgate, IDBI and Nestle.

The methodology for computing the index has also undergone a change. The Sensex is now calculated based on the market capitalisation that is adjustment for the free-float. This coupled with the significant changes in share price of index constituents has resulted in a change in weightage of individual stocks. Infosys, for instance, was traded at Rs 9,946 while it is currently quoted at Rs 5,806. On the other hand, the share price of Reliance has moved up from Rs 363 to Rs 576.