Highs and lows of Sensex: A snapshot of a journey to the 30,000 peak
For the second time in as many years, the BSE Sensex touched the 30,000 mark. However, on both the occasions it failed to close above the high watermark. Nonetheless a 300 times jump in the Sensex since its inception in 1979 results in a 15.75 percent compounded annual growth rate (CAGR) over the last 37 years.
However, despite its stellar returns, Sensex has had a rough ride. Assuming its year of inception as the base year and a base value of 100 points, we track the benchmark index’s journey through the years right up till he notched up the magic figure.
From 100 to 1,000 points
On July 25, 1990 Sensex touched the 1,000 mark. The day is important since not only did the Sensex achieve an important psychological barrier but it gained 10 times in slightly over 11 years. The first 11 years saw the Sensex growing by a CAGR of 23.28 percent. The year 1990 is also important as it started on what is generally agreed as a bubble, but later came to be defined by the Harshad Mehta scam.
From 1,000 to 4,000 points
Sensex galloped along to reach the next 1,000 points in less than two years. On January 3, 1992 Sensex touched the 2,000 level but only after two weeks did it close above that level. In fact, the Sensex scaled 3,000 points on the last day of February 1992 and the 4,000 mark within a month on March 1992.
The sharp rally coincided with two major events unfolding on the ground. First, as mentioned earlier was a scam which was fuelling the rally and second was Finance Minister Manmohan Singh’s historic Budget speech where he opened up the Indian economy.
From 4,000 to 6,000 points
It was a hard uphill task for Sensex which couldn’t build on the momentum it had gained until then. In 1992 it looked strong, and the next leap forward – by another 2000 points – took over 7 years to achieve. The stock market bubble burst open in April 1992. Within a year, the Sensex, which was just 500 points away from touching 5,000 crashed to less than 2,000 points. A slow and grinding climb resulted in Sensex scaling 5,000 levels on December 30, 1999.
Here again two events led the rally. One was a global event, where the dotcom bubble was setting world markets on fire and the second was the election victory of BJP-led government. The 6,000 level was achieved in February 2,000 but the dotcom bubble was soon coming to an end. Markets soon crashed to enter a phase of consolidation.
Journey to 10,000 points
It took another 6 years for the market to reach the 10,000 mark. On February 6, 2006 the level was breached with rampant buying from foreign as well as domestic investors. A global rally was led by a sharp run in commodity prices on account of frantic spending by China to meet the Beijing Olympic deadline.
Sensex score till then: it had gained 100 times in a span of 27 years posting a CAGR of 18.60 percent. From 1,000 to 10,000 it took the market 16 years growing at a CAGR of 15.48 percent.
From 10,000 to 20,000 points
Sensex was once again on a roll – literally. It scooped up the next 10,000 points in just 18 months which puts to shame the first 10,000 points which had taken it a better part of 27 years. On October 29, 2007 Sensex sighted the 20,000 mark as the market was heating up. The trigger was global liquidity which was generated by financing derivatives and highly leveraged products in the developed markets.
From 20,000 to 30,000 points
For the second time in as many years, the BSE Sensex touched the 30,000 mark. However, on both the occasions it failed to close above the high watermark. Nonetheless a 300 times jump in the Sensex since its inception in 1979 results in a 15.75 percent compounded annual growth rate (CAGR) over the last 37 years.
However, despite its stellar returns, Sensex has had a rough ride. Assuming its year of inception as the base year and a base value of 100 points, we track the benchmark index’s journey through the years right up till he notched up the magic figure.
From 100 to 1,000 points
On July 25, 1990 Sensex touched the 1,000 mark. The day is important since not only did the Sensex achieve an important psychological barrier but it gained 10 times in slightly over 11 years. The first 11 years saw the Sensex growing by a CAGR of 23.28 percent. The year 1990 is also important as it started on what is generally agreed as a bubble, but later came to be defined by the Harshad Mehta scam.
From 1,000 to 4,000 points
Sensex galloped along to reach the next 1,000 points in less than two years. On January 3, 1992 Sensex touched the 2,000 level but only after two weeks did it close above that level. In fact, the Sensex scaled 3,000 points on the last day of February 1992 and the 4,000 mark within a month on March 1992.
The sharp rally coincided with two major events unfolding on the ground. First, as mentioned earlier was a scam which was fuelling the rally and second was Finance Minister Manmohan Singh’s historic Budget speech where he opened up the Indian economy.
From 4,000 to 6,000 points
It was a hard uphill task for Sensex which couldn’t build on the momentum it had gained until then. In 1992 it looked strong, and the next leap forward – by another 2000 points – took over 7 years to achieve. The stock market bubble burst open in April 1992. Within a year, the Sensex, which was just 500 points away from touching 5,000 crashed to less than 2,000 points. A slow and grinding climb resulted in Sensex scaling 5,000 levels on December 30, 1999.
Here again two events led the rally. One was a global event, where the dotcom bubble was setting world markets on fire and the second was the election victory of BJP-led government. The 6,000 level was achieved in February 2,000 but the dotcom bubble was soon coming to an end. Markets soon crashed to enter a phase of consolidation.
Journey to 10,000 points
It took another 6 years for the market to reach the 10,000 mark. On February 6, 2006 the level was breached with rampant buying from foreign as well as domestic investors. A global rally was led by a sharp run in commodity prices on account of frantic spending by China to meet the Beijing Olympic deadline.
Sensex score till then: it had gained 100 times in a span of 27 years posting a CAGR of 18.60 percent. From 1,000 to 10,000 it took the market 16 years growing at a CAGR of 15.48 percent.
From 10,000 to 20,000 points
Sensex was once again on a roll – literally. It scooped up the next 10,000 points in just 18 months which puts to shame the first 10,000 points which had taken it a better part of 27 years. On October 29, 2007 Sensex sighted the 20,000 mark as the market was heating up. The trigger was global liquidity which was generated by financing derivatives and highly leveraged products in the developed markets.
From 20,000 to 30,000 points
The final leg of the journey for Sensex could at best be described as an arduous climb. To say it limped along would be an understatement. After the financial meltdown Sensex crashed to less than 8,000 before gaining strength to touch the 30,000 mark on March 2015.
A major part of the 22,000 point journey from a low of 7697 on October 27, 2008 to 30,000 in March 2105 was spurred by infusion of global liquidity by central banks across all major economies. The last part of the journey was helped by a clear majority for Narendra Modi-led government. This rally from the low was at a CAGR of 20.78 percent.
However, after the initial euphoria died down markets corrected again and it took nearly two years for 30,000 to be regained.
A major part of the 22,000 point journey from a low of 7697 on October 27, 2008 to 30,000 in March 2105 was spurred by infusion of global liquidity by central banks across all major economies. The last part of the journey was helped by a clear majority for Narendra Modi-led government. This rally from the low was at a CAGR of 20.78 percent.
However, after the initial euphoria died down markets corrected again and it took nearly two years for 30,000 to be regained.
Happy Investing
Source:Moneycontrol.com
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