The Sensex story in the 25-year reform period

The Sensex story in the 25-year reform period: Only seven of the 30 stocks in the 1992 Sensex are still a part of the index...

Sensex story

This refers to the interesting piece “The Sensex story in the 25-year reforms period” by
Lokeshwarri SK (The Hindu Business Line, August 8). Without telling, the story also reveals the dangers inherent in depending on the oscillations of the ‘Sensex pendulum’ to assess the health of the financial market or in a broader sense, or for drawing the growth trajectory of the economy.
The composition of the 30 shares reckoned for computing Sensex keep changing with the fortunes of the sectors or management of companies each one of them represent. As brought out in the report, only seven out of thirty which were there  in the basket are surviving after a quarter of a century. 
The irrelevance of using Sensex as a benchmark for investment decisions become more glaring, once we factor in the changing fortunes of hundreds of other scrips outside the Sensex basket. Market pundits will scare you with market capitalisation figures. But, how many of those scrips with ‘heavy’ market capitalisation will stand the test of a ‘distress sale’ is anybody’s guess.

M G Warrier, Mumbai


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