Sensex saga: From 100 to 50k in four decades

History has been made as India’s BSE Sensex hits an all-time high summit of 50,000 on January 21, 2021. The Nifty too breached the 14,700-mark in a first. 

This is a day that D-Street commentators and analysts were expecting since the start of the new year, as the markets rebounded from one of its worst performances in March 2020, following the coronavirus pandemic. From the 25k plus of March, the Sensex has almost doubled its value over a matter of 10 months. The journey from 45,000 to 50,000 took just over a month. 

Before the high…

One only has to look at the performance of the markets over the last year, to get a crash course on what it means to be on a roller coaster ride. Cut to January 2020 when the Sensex saw a peak of 42,273.87 points. In early January, the Nifty too touched a new summit of 12,400. The high continued into early February, but that was short-lived. On February 28, as the coronavirus scare grew, the Sensex crashed 1,448.37 points (3.64 percent), touching 38,297, the Index’s second-worst performance since August 2015. The Nifty touched 11,219.20, dropping 3.56 percent. Investor wealth worth Rs 5 lakh crore was erased on the BSE, following a global sell-off, and spreading a scare in the markets. 

Worse was to come. On March 11, 2020, the World Health Organisation (WHO) declared the Covid-19 outbreak a pandemic. The already spooked markets reached a point of a meltdown on March 23. In the first hour of that day’s trade, both the benchmark indices crashed over 10 percent, leading to a trading freeze for 45 minutes. That day, the Sensex crashed to 25,918.24 points down 13.15 percent, while the Nifty settled at 7,610.25 points. The Index touched a further low of 25,638 points In March, foreign institutional investors offloaded shares worth almost Rs 62,000 crore, according to the National Securities Depository Limited (NSDL) data. 

A year that saw the Sensex crashing to record lows also saw market recovery with FIIs reposing their faith and pumping in Rs 1.6 lakh crore in 2020. The phased unlocking of the economy and the stimulus package together aided market recovery through the year. By November, the Sensex began hitting the 44k plus levels all over again, on the back of vaccine-related developments. As vaccine rollout announcements were made across the globe and India too expected its own vaccination exercise in mid-January 2021, the Sensex crossed 47k levels on December 31, 2020. 

Four decades and counting

The year is a significant chapter in the history of the BSE Sensex, which was launched at a base price of 100 in 1978-79. The 30-stock index hit the four-digit mark for the first time ever on July 25, 1990, closing at 1001 on that day. It took till early 2000 for the Sensex to touch 5,000 points, while the Index closed over the 10,000-mark in February 2006. The year 2008 was a landmark year for the stock market, as the BSE Index plunged several times through the year, to below 10k levels, a fall by over 50 percent from its earlier high. In fact, on December 11, 2007, the Sensex had closed over the 20k-mark. It was in May 2014 that it touched the 25-k mark. It took another five years when the Sensex hit the 40-k mark on May 23, 2019, as the present government retained power at the Centre. Ever since it has taken a mere two years to hit 50k. The Sensex has handed out a compounded annual returns of nearly 15.5 percent over the last four decades.

(Source: businesstoday.in)

The reasons for the growth story have been many, including higher than expected corporate earnings, a boost in liquidity by the RBI, and a strong inflow of foreign funds. Foreign institutional investment in 2020 touched over Rs 1.6 lakh crore, the highest among emerging markets. This was the second consecutive year when FII inflows into India’s equities saw a high. In 2019, the inflows stood at a little over Rs 1 lakh crore. Also, the Indian market seems to be in alignment with the global trend and markets like the US are also on the same trajectory. Global liquidity is high as well, as several central banks are bolstering economies

The upcoming Budget, the status of coronavirus infections across the globe, and the success of vaccination programs will also impact the Sensex in the coming future. 

In conclusion

It has been a blistering rally for the Sensex in the last 43 years, from touching the 100- milestone in 1978 to the 50-k summit of January 2021. The year 2020 touched an abyss at 25k levels and ended at over 47k, in a way summing up the nature of the markets.