Indices extend post-Budget bull run; D-Street’s ascent to mount 50,000

The Sensex on Wednesday closed above the 50,000-mark for the first time. On two previous occasions, the index had crossed the landmark intra-day, but had failed to sustain the gains.

Sensex is a free-float market cap weighted index that tracks the performance of India’s largest 30 firms. The base value for the index was taken as 100 and base year as 1979. The widely tracked index closed above the 5,000-mark for the first time in 1999. The index has given annualized return of 11.5 per cent in the last two decades. We compare the index in 1999, with how it looks at present.

Back then, the m-cap of all BSE-listed firms was just Rs 7 trillion. Today we have three companies — (Reliance, TCS and HDFC Bank) — with individual m-cap exceeding Rs 7 trillion. While the index has risen 10x since October 1999, the overall m-cap has grown 28x. The trailing 12-month price-to-earnings (P/E) multiple for the index back then was 21x. Today it is a highest-ever 34.2x.

India’s market capitalisation was more distributed in 1999, with Sensex companies accounting for just 39 per cent of overall market cap. Today, they account for nearly half of India’s market cap. Also, the sectoral distribution more even compared to now, where financial stocks dominate.

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