Stocks

Remarkable journey says invest in India

Ashishkumar Chauhan | Updated on January 21, 2021

BSE employees celebrate near the bull's statue after the Sensex crossed the 50,000 mark for the first time, in Mumbai, on Thursday   -  Mitesh Bhuvad

The establishment of BSE in 1875 as the Native Share & Stockbrokers Association, the first stock exchange in Asia and one of the oldest working public institutions in India was a major milestone for the Indian economy.

Its benchmark index, the S&P BSE Sensex was first compiled on January 2, 1986 comprising of the top 30 stocks in the country, marked another major milestone as it touches 50,000 points for the first time from a base value 100 in 1979. Over the last forty-two years, the Sensex has traversed a path through many peaks and bottoms, from 100 points to levels of 50,000 on 21 January 2021.

There were periods of exceptionally fast growth and some periods of consolidation and slower rise. It took the S&P BSE Sensex 11 years to cross the 1,000 mark in 1990, but it crossed the next 3,000 points by end of 1991.

The milestone of 10,000 took 27 years in 2006, the next 10,000 points came in just 18 months, when on October 29, 2007, when the Sensex topped the crucial 20,000 mark. The crucial 30,000-mark was breached in 2015, 40,000 in 2019 and 50,000 in 2021.

Economic reform

The Sensex has had a ring-side view of every major economic reform in the country such as liberalisation of the investment and trade in 1991, the US nuclear deal in 2008, the GST regime in 2017, the rise of the mutual fund industry and lows such as the dotcom bubble, global financial crisis, the ongoing Covid-19 pandemic and now the post-pandemic recovery. Since inception in 1986, the Sensex has seen 8 Presidents, 10 Prime Ministers and 14 Finance Ministers.

The S&P BSE Sensex has delivered an impressive compounded annual growth rate (CAGR) of about 16 per cent per annum on its journey to 50,000 points. If you consider dividends, then this is close to 17 per cent, significantly higher than other asset classes such as gold, real estate or bonds. For instance, if an investor had invested ₹100,000 in the Sensex in 1979, it would have been worth close to more than ₹5 crore.

 

Reflection of growth

The Sensex, therefore, is not only a benchmark of the Indian economy but also a true reflection of growth of India over all these years.

The Index tracks the performance of the 30 financially stable companies representing a sample of large, liquid and representative companies listed on the BSE.

The criteria are so stringent that over these years, only 4 companies have continuously maintained their position - Reliance Industries, ITC, Hindustan Unilever, and Mahindra & Mahindra. Larsen & Toubro was also part of the original constituents, but was out of the Sensex for a brief period in 2004. Peico Electronics, one of the original constituents, does not even exist now. Such is the churn of time.

India will remain among the fastest growing economies in the post-Covid world on back of strong macro-economic headwinds, continued economic reforms, improvement in business climate and domestic inflows.

The indications are there that the Indian markets will continue to perform well in the long run and the S&P BSE Sensex will be touching new highs in coming days.

 

The author is Managing Director and CEO of BSE

Published on January 21, 2021

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