Rise of investors boost entrepreneurship: Journey of Sensex in the past 25 years

Kolkata: The history of the Indian stock exchange is quite long. The Bombay Stock Exchange, or popularly the BSE, was set up in 1875 when it began functioning as "The Native Share & Stock Brokers' Association" on July 9. It is one of the oldest equity markets of the world and is supposed to be the oldest in this continent. The Sensex, the most recognisable name associated with the BSE, was introduced in 1986. The next landmark years in the journey of the Sensex is 1995, when BSE shifted from a manual trading system -- when traders would engage in full-throated in shouting on the trading floor -- to a fully automated, screen-based electronic trading platform.

Even those who don't have any idea for the stock market, or have never invested a penny in the equity markets, have heard about Sensex. It is also known as the S&P BSE Sensex Index and is the first benchmark index in the country that measures the Bombay Stock Exchange (BSE). As the nomenclature indicates, the Sensex is composed of the 30 largest and most-traded stocks within the BSE. The point to be kept in mind is that though it is supposed to reflect the state and movement of the stock market, it actually ends up mirroring the movement of the large-cap stocks. Mid caps and small caps remain out side the purview of the Sensex.

Under intense balance of payments scare, the Indian economic reforms were inaugurated in 1991 by the Narasimha Rao government with finance minister Manmohan Singh at the wheel. In 1991, the Sensex stood at about 1,000 points. On January 3, 2000, the index rose to 5375, an all-time high. The index jumped a massive 370 points or 7.39% in a single day.

Interestingly, the index stood at close to 5,000 levels on December 30, 1999. The 6,000 level was reached in February 2000 and two tailwinds powered the rise -- the dotcom surge that eventually turned out to be a bubble and the victory of Atal Bihari Vajpayee-led NDA in the general elections.

The psychologically crucial 10,000 level was breached on February 6, 2006. The index sailed past this level on the boosters of big buying from foreign investors and domestic institutions. A global rally was led by a sharp run in commodity prices on account of big expenditures by China which was rushing to meet the Beijing Olympic deadline. Data suggest that the Sensex had risen 100 times in 27 years at a CAGR of 18.60%.

The journey from 10,000 to 20,000 was completed in just 18 months!!! On October 29, 2007 Sensex kissed the 20,000 mark. Analysts had attributed the surge to global liquidity generated by financing derivatives and leveraged products in the western. developed markets. However, the sprint was followed by an arduous trek. In 2008 came the global meltdown, which brought Sensex to 8,000 and then only in March 2015 could the index scale 30,000.

The equity markets had a fresh lease of life when the Narendra Modi-led NDA government assumed the reins at the Centre. In fact, on May 16, 2014, when the Lok Sabha votes were counted, Sensex jumped across 25,000 for the first time. Between May 2014 and July 2024 Sensex moved up 220%. The year 2018 began breezily and Sensex zoomed to 35,000 in January. The move from 34,000 to 35,000 was completed in just 16 sessions.

The journey beyond 40,000 was extremely significant since it coincided with the Covid-19 pandemic and the quite unthinkable developments surrounding the pandemic. In June 2019, before the pandemic struck, the hit 40,000 mark. Predictably, the equity markets were paralysed by the pandemic. But by December 2020, the index was rising again and reached 45,000.

As the world was caught unawares by the Covid-19 pandemic, governments slapped lockdowns to contain the virus that sent shockwaves through industries. On March 9, 2020, the Dow Jones experienced its worst single-day crash, diving 7.79%. On March 12, the US index slumped again and this time by 9.9%. A few days later Dow lost an incredible 12.9% plunge on a single day. The Sensex took a hit of 2,919 points or 8.18% on March 9, 2020.

But the gradual waning of the pandemic and its attendant controls unleashed a hidden Usain Bolt as it were. A sprinting Sensex took a mere two months and hit the 50,000 psychological mark on February 3, 2021.

The year 2021 witnessed rampaging bulls right through the year. The index covered 10,000 points to reach the 60,000 mark on September 24, 2021. The surge exceeded all bullish predictions after the pandemic as common people and foreign investors began pumping money in Indian equities. The Sensex touched 70,000 on December 11, 2023 and the path from 60,000 to 70,000 was covered in 529 trading sessions.

The year 2024 began on a buoyant note. On April 9, 2024, Sensex flew past 75,000 for the first time and less than three months later the liquidity-triggered surge took the index past the 80,000 mark on July 3, 2024.

Significantly, the markets suffered a hiccup on June 4. It was the day of counting following the general elections and when it became clear that BJP got a weak mandate the index nosedived as much as 6%. However, after the Prime Minister assured that his government will continue the policy of reforms, investors, both domestic and foreign rushed back to the markets.

The bull run was eventually halted in the later part of 2024, when FIIs, wary of stretched valuations in Indian equities, began to withdraw investment. The Sensex halted its northward march, consolidated at lower levels, but thanks to spirited investments by domestic institutions and retail investors, who were also pumping in more than Rs 1,000 crore, on average, in the market on every trading day, began clawing back lost ground in the Q2FY period.

Another dampener to the Indian market was the punitive 50% tariff slapped on a wide array of goods imports from India by US President Donald Trump. It is the highest in the world and analysts said, prevented a faster rise of the market despite a recovery in overall Q2 earnings. As the 25th year of the century draws to a close, analysts are predicting a push in 2026.

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Investment guru Mark Mobius predicted in 2024 that the Sensex will hit 1 lakh by 2030. Morgan Stanley has forecast that in a bull-case the index can zoom to 1,07,000 level by the end of 2026. While the macro economic scenario is conducive led by lowering interest rates, low retail inflation, surge of domestic investments, lowering Fed rates, seem conducive, a surge is expected when corporate earnings grow sustainably and the Indo-US bilateral grade deal is clinched.

The rise of income levels of the middle-class and the digitisation of payments have been two great influencers in the equity markets. With the digital payments in place, people from remote places are also able to directly invest in equities and mutual funds without moving out of their homes, thanks to the numeroud apps that are offering such direct investment services both in equities and mutual funds.