Sensex jumps 100 times every 30 years: 7 things to know
Experts always say that the equity market is one of the most profitable investments. Yet, the slowdown in the last few years and the 2008 US crisis made retail investors wary of the stock market. Despite that, Indian markets have given a handsome return.
The Sensex value, for example, jumps 100-fold every 30 years, according to a study by Motilal Oswal, a brokerage firm. As many as 47 stocks jumped to 100 times their values in the last two decades alone, the report added. They are called 100x stocks. This itself shows the profitability of equity investments.
Here are 7 interesting things to know:
1) BSE Sensex is based on the value of 100 from the year 1979. It took 27 years to jump 100 times to 10,000 in February 2006. On an average, it takes the Sensex 30 years to rise to 100 times the value. “As of March 2014, the Sensex stood at 22,400 levels. It was at 224-levels in 1984 i.e. 100x in 30 years,” the MOSL report said. This amounts to an average annual growth rate of 17% per year.
2) There were many stocks which rose 100-fold between 1994 and 2014. However, some fizzled out for different reasons. Only 47 stocks managed to hold on to their over 100-fold gains in the past twenty years. Leading the pack is Infosys. Its stock price multiplied 2,902 times in the past two decades. Its competitor in the IT space Wipro, meanwhile, jumped to 875 times its original 1994 value over the same 20-year period. Some stocks took less than 20 years to cross the 100x mark like Lupin. The pharma company jumped 1170 times in less than 20 years – between 2002 and 2014.
3) On an average, it takes a capable stock 12 years to multiply 100 times in value. This is lower than the time it takes the Sensex to jump 100-fold. This means, stocks rise faster than the Sensex, thus taking lesser time. To rise 100 times its value in 12 years, a stock would need to give a whopping 47% return on an average per year.
4) When you invest and earn profits, your income and capacity to purchase increases. This is called purchasing power. An equity investment, which increases 100 times in value in 20 years, increases your purchasing power by 26 times if inflation grows at an average rate of 7%. In contrast, a fixed income investment gives an approximate return of 7% after deducting from taxes. If this is invested over 20 years, all the money it earns you gets eroded because of inflation. This means, there is barely any change in your purchasing power due to your fixed income investments.
5) All this is considering that the stock rises to 100 times its value. Many investors may feel that picking stocks which have the potential to grow to 100 times its value may be like finding a needle in a haystack. However, the MOSL report suggests that finding such stocks may be difficult, but not impossible. “Once sensitized to such a possibility and armed with the right framework, investors may find the challenge of unearthing the next 100-bagger more joyous than arduous,” the report said.
6) One thing that makes picking such stocks easy is that it does not need the right timing. You do not have to pick up the stocks only when they are cheaply available. If the stock has the capacity to jump 100-fold, then it will do so no matter when you buy – sooner or later. So, it is not that only the early bird gets the worm. “Most 100x stocks offer multi-year windows to buy into them, and still rise 100 times from that level,” the MOSL report said.
7) That said, the chances of succeeding are higher the sooner you pick these stocks. This period is called the opportunity period. If you buy the stock beyond this period, you may then have to wait longer for the stock to rise 100-fold. Of the 47 100x stocks, Motherson Sumi and Shree Cement had the highest opportunity period of 11 years each. This means, both these stocks could have been bought anytime from 1994 to 2004, and the stock prices would have risen 100-fold even thereafter. Infosys and Lupin had 5 and 9-year buying windows respectively.
This work is produced by Simplus Information Services Pvt Ltd. Customer engagement through content.
Experts always say that the equity market is one of the most profitable investments. Yet, the slowdown in the last few years and the 2008 US crisis made retail investors wary of the stock market. Despite that, Indian markets have given a handsome return.
The Sensex value, for example, jumps 100-fold every 30 years, according to a study by Motilal Oswal, a brokerage firm. As many as 47 stocks jumped to 100 times their values in the last two decades alone, the report added. They are called 100x stocks. This itself shows the profitability of equity investments.
Here are 7 interesting things to know:
1) BSE Sensex is based on the value of 100 from the year 1979. It took 27 years to jump 100 times to 10,000 in February 2006. On an average, it takes the Sensex 30 years to rise to 100 times the value. “As of March 2014, the Sensex stood at 22,400 levels. It was at 224-levels in 1984 i.e. 100x in 30 years,” the MOSL report said. This amounts to an average annual growth rate of 17% per year.
2) There were many stocks which rose 100-fold between 1994 and 2014. However, some fizzled out for different reasons. Only 47 stocks managed to hold on to their over 100-fold gains in the past twenty years. Leading the pack is Infosys. Its stock price multiplied 2,902 times in the past two decades. Its competitor in the IT space Wipro, meanwhile, jumped to 875 times its original 1994 value over the same 20-year period. Some stocks took less than 20 years to cross the 100x mark like Lupin. The pharma company jumped 1170 times in less than 20 years – between 2002 and 2014.
3) On an average, it takes a capable stock 12 years to multiply 100 times in value. This is lower than the time it takes the Sensex to jump 100-fold. This means, stocks rise faster than the Sensex, thus taking lesser time. To rise 100 times its value in 12 years, a stock would need to give a whopping 47% return on an average per year.
4) When you invest and earn profits, your income and capacity to purchase increases. This is called purchasing power. An equity investment, which increases 100 times in value in 20 years, increases your purchasing power by 26 times if inflation grows at an average rate of 7%. In contrast, a fixed income investment gives an approximate return of 7% after deducting from taxes. If this is invested over 20 years, all the money it earns you gets eroded because of inflation. This means, there is barely any change in your purchasing power due to your fixed income investments.
5) All this is considering that the stock rises to 100 times its value. Many investors may feel that picking stocks which have the potential to grow to 100 times its value may be like finding a needle in a haystack. However, the MOSL report suggests that finding such stocks may be difficult, but not impossible. “Once sensitized to such a possibility and armed with the right framework, investors may find the challenge of unearthing the next 100-bagger more joyous than arduous,” the report said.
6) One thing that makes picking such stocks easy is that it does not need the right timing. You do not have to pick up the stocks only when they are cheaply available. If the stock has the capacity to jump 100-fold, then it will do so no matter when you buy – sooner or later. So, it is not that only the early bird gets the worm. “Most 100x stocks offer multi-year windows to buy into them, and still rise 100 times from that level,” the MOSL report said.
7) That said, the chances of succeeding are higher the sooner you pick these stocks. This period is called the opportunity period. If you buy the stock beyond this period, you may then have to wait longer for the stock to rise 100-fold. Of the 47 100x stocks, Motherson Sumi and Shree Cement had the highest opportunity period of 11 years each. This means, both these stocks could have been bought anytime from 1994 to 2004, and the stock prices would have risen 100-fold even thereafter. Infosys and Lupin had 5 and 9-year buying windows respectively.
This work is produced by Simplus Information Services Pvt Ltd. Customer engagement through content.
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