Sensex touches historic 50,000, here is why share market is booming
Almost all the major sectors have seen growth in the last few months
Sensex touched an all-time high of 50,000 on Thursday at 09:20 in the morning. The Bombay Stock Exchange (BSE) index Sensex gained 275.61 points at 50,067.73 and the Nifty gained 85.00 points to trade at 14,729.70 on Thursday morning. However, the Sensex closed at 49,792 and the Nifty closed at 14,644.70 on Thursday. This was the first time when Sensex crossed 50 thousand marks.
44 stocks of total 50 in Nifty, were trading in green mark and only 6 were in red mark. Among the Sensex stocks, BAJAJFINSV gained 3.45 per cent, followed by RELIANCE, INDUSINDBK, HCL TECH and BAJAJ-AUTO. At the same time, BHARTIARTL, HDFC, and HDFCBANK were among the stocks in the fall.
A small background on Sensex
The country’s first equity market was launched on January 2, 1986 (base year: 1978 = 100). It has risen from 124 in April 1979 to 50,000 on Thursday. This equals to compound annual growth of 15.9 per cent in more than 42 years. From 1990, when the Sensex hit 1,000, the CAGR is 13.5 per cent.
35 years ago, there were no banking stocks and IT companies in the benchmark index. Now, it has 4 stocks from information technology companies and 9 stocks from banking and finance. Only 5 company which were originally the part of the index have been able to retain their place – HUL, L&T, ITC, M&M and Reliance Industries.
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Why share market is rising?
The continuous growth in BSE is followed by the crash triggered by the coronavirus pandemic in February and March last year. The growth is credited to high foreign portfolios investors (FPI), since April 1, 2020, with inflows hitting a record high of Rs 2.41 lakh crore. The system is loaded with liquidity and it is being considered as one primary reason behind the unprecedented growth in the stock market.
The latest spike which pushed the Sensex to cross 50,000 is encouraged primarily because of the smooth transition of power in the United States after a deadly infiltration in the US capitol earlier. Market sentiments lifted when the new US president Joe Biden offered hope by promising to take all Americans along and hinting at improving relations with other countries. The new US President’s proposed $1.9 trillion stimuli, which is likely to keep global markets at elevated levels for now.
Experts have opined that the combination of strong capital inflows, leaner corporate balance sheets, low-interest balance, and steps taken by the government to quicken the pace of economic recovery in the country have resulted in the positive growth of Sensex, Nifty and other stock exchanges. Impressive corporate results in the second and third quarters is also a reason why we have seen a good rally at BSE.
Are broader markets a part of growth?
The Sensex, which fell by 36 per cent between February and March 23, 2020 (the day when the nationwide lockdown was announced) had closed at 25,981 on February 23. It has risen by 68 per cent since April 1. It’s not just the Sensex which has gained this much, the broader markets too have been a part of this growth.
During the same period, the BSE mid-cap index has grown more than 80 per cent, and the small-cap index by more than 95 per cent. Almost all the major sectors have participated in the growth – metal indices have grown 110 per cent, the auto index has grown 117 per cent and IT indices has grown 105 per cent. The oil and gas index grew by 47 per cent, the technology, banking and consumer durable, capital goods and healthcare indices have risen by over 60 per cent, telecom grew by 46 per cent and FMCG grew by 24 per cent.
Why is there positivity in Stock Markets?
Positivity in the share market exists for several reasons. The sharp decline in coronavirus cases in India and across the world, the beginning of the mass vaccination program has raised hopes for normalization for the economy. The strong showing of companies in the October-December quarter of the current financial year has been a positive sign.
Experts are expecting to see a restart of investment by the corporate sector in the year 2021 as demand and consumption for cement, steel and real estate has increased.
The low-interest scenario availed by the government is likely to continue for some time. There is also talk of fiscal stimulus on February 1 Budget, which could provide a fillip to the markets and economy. Soothing trends from Joe Biden’s arrival in the White House has brought hope of improvement in the global trade environment along with the rebuilding of trust and better trading relations between nations.
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