Sensex Turns Senior Citizen (60,000). What does it mean now?

BSE Sensex Index, which means (Sensitive Index) was named by Deepak Mohoni is a free-float market-weighted stock market index of 30 well-established and financially sound companies listed on the Bombay Stock Exchange. The 30 constituent companies, which are some of the largest and most actively traded stocks, are representative of various industrial sectors of the Indian economy.

Published since 1 January 1986, the S&P BSE SENSEX is regarded as the pulse of the domestic stock markets in India. The base value of the SENSEX was taken as 100 on 1 April 1979 and its base year as 1978–79.

From the base value of 100 in 1979, Sensex is currently trading at 60048, which means it had given total returns of 60048% and CAGR of 16.5% in 42 years.

In the year 1991 exactly three decades back when Liberalization happened in India, Sensex touched 1000 an important four digit mark. If we consider that year, then Sensex had given total returns of 6004.8% and CAGR of 14.7% in 30 years.

Journey of Sensex and Important Events since its Inception:

Image is taken from BSE Twitter Handle.

From the above chart, we see that Journey of Sensex was not a straight line. It has seen many ups and downs event like: War, Liberalization, Scam, Terrorist Attack, Global Financial Crisis, General Elections, Pandemic Crash and many more. And in all this, only one thing was common, which is Sensex moved up in long term despite facing all these hurdles.

Sensex consists of top 30 stocks in Indian Equity Market. Index is being evaluated and Rejig process is done to remove stocks that don't fit in the index and new stocks are added in the Index. From Inception, hardly 1-2% of the stocks are now part of this Index. Most of the stocks are removed and some of them would be penny or even got delisted. One of the fact is 95% of the active mutual fund managers didn't beat Sensex Returns. One of the reason would be Mutual Fund Managers have competition with the benchmark, whereas Sensex doesn't have to compete with anyone and it is itself a benchmark for others.

What does it mean for the investor, as Sensex is at 60,000?

If we see the number 60000, then it would be great and many would worry about valuation. If we compare our Indian Equity Market globally, then recently Indian Stock Market overtakes France and becomes sixth market.

If we consider top equity market, then USA equity market has total market capitalization of $47 Trillion, Chinese equity market has total market capitalization of $12.2 Trillion and Indian equity market has total market capitalization of $3 Trillion. Being the second most populous country in the world, we are still behind and there are a lot of opportunities for our nation to tap in. If I explain this with an analogy, then it could be said that our Indian stock market has grown from a microcap to smallcap and still there is a long journey to go from smallcap to midcap and then largecap.

As said in the web series of Scam 1992: "Invest in India, India ka bhaav badne vala hai."

This stills hold true even after three decades. Maybe we or our next generation might see six digit mark i.e. 1,00,000 in Sensex.

1000, 30000, 50000, 60000 and 100000 is just a number for an investor unless an investor truly invests in the long term. Invest in quality stocks after doing proper research and analysis. If research and picking stock is not your cup of tea, then Invest in Sensex directly through Index Funds which charge least expense ratio. One of the benefit of this would be despite having less or no knowledge still you will be able to beat 95% of the mutual funds manager in your investment journey.

This is all from our side for Sensex Journey. I hope it was not boring and you had found it interesting as well. If you liked the blog, then don't forget to share it on Whatsapp, Twitter and LinkedIn. And if you have any opinions or views on this, then mention it in the comment section for the readers to understand it in a better way.

Thank You! Enjoy your weekend.