Rise and fall of BSE Sensex

The rise and fall of Bombay Sensex the popular indicator of stock market sentiments has always been a headline making incident over it’s 20 year life span . The Sensex which is weighted average (based on market capitalization) of 30 leading scrips against base year 1979 has witnessed unanticipated crash or boom on several occasions .

The rise of sensex is linked to strengthening of the Indian economy and fall in sensex is linked to temporary setbacks and corrections over the past two decades. Starting it’s journey from 1986 the sensex touched the four figure mark in July 1990 and later fuelled by the liberal economic policies of the then Finance Minister Manmohn Singh it zoomed past the 4000 mark in 1992 . Arrival of Harshad Mehta on the scene and the subsequent devastation and mayhem in the Stock exchange kept the markets subdued for the next several years . Sensex could touch the 5000 mark only in 1999 . Journey from 6000 to 7000 mark again took 5 years but thereafter there was no looking back. The sensex gained 10000 points in next 30 months touching 18000 in Oct .2007.

The continuous boom in stock market in last five years has lead to growth of prices above 25 % per annum. A market watcher has rightly commented that the Sensex during the period has not grown but jumped . Economy has benefited by the decontrolling influence as well as opening of markets to foreign investors and is fast becoming globalised in true sense of the term. Indian companies have frequently been in news for competitive buying of professionally manged companies abroad. The worth of India in stock market today is in proximity to  $1.5 trillion. Over the years the dominant scrips influencing the market have also changed . The market which was dominated by commodity scrips , now also has a variety of scrips related to infrastructure sector , IT and Telecom with dominant influence. This reflects the chnge in focal activities of the economy.

The rise of sensex has also been punctuated with several market crashes which have sent the investors running for cover. On ten occasions fall of more than 600 points has occurred in a day.

In recent memory while the sensex was climbing record heights it received a jolt in the participatory note crisis in Oct. 2007. The crisis was in follow up to restrictions announced by the Finance Ministry on investments through Participatory Notes. Over period of one hour the sensex declined by 1744 points on 17th Oct.2007 . The crisis was however promptly tackled by the clarifications given by the Ministry and the sensex bounced back. The 20000 mark was soon crossed over.

Jan.2008 was another memorable month for investors . Against a highly volatile market, investors panicked following apprehensions of US economy plunging into a recession and consequent weakening of global markets. On 21st and 22nd of that month, the sensex declined by 2283 points . Jan 22nd saw the biggest intra day fall of 2273 points. The decline was checked and Trading assumed an upward trend after US Federal Reserve effected a cut in interest rate by 75 basis points . The US authorities move in fact affected the stock markets in other Asian markets too in a positive way .

The crisis repeated the lessons of previous such crashes The message was for small investors ,to stay watchful in an overheated market.