Sensex at life highs but No Fireworks for Retail Investor

By | October 31, 2013

The BSE Sensex closed at a record high on Wednesday riding on strong fund flows from overseas investors. The Sensex gained 105 points to close at 21,034, while the 50-share Nifty ended at 6,251.70, rising 31 points.

Media is abuzz with Sensex reaching new life High on Diwali day which is quiet possible but should you as retail investor be excited about this?

Sensex represent only 30 stocks from gamut of 1000+ actively traded stocks, Retail traders and investors trade in stocks which is showing a different picture all together.

The worrying aspect of the current rally is that many stocks are trading significantly off their highs when the Nifty hit 6,229 (the previous high for 2013 hit in May) earlier this year. 

Banks and Financials forms almost 30% of SENSEX and Banks are the worst hit in 2013. Bank Nifty is trading almost 2000 points below its May 2013 High.

In May, Punjab National Bank shares traded at Rs. 852, but they are now worth Rs. 498. BHEL traded at Rs. 207, but is now worth Rs. 130. L&T shares traded at Rs. 1,100 but have now fallen to Rs. 977. SBI shares are at Rs. 1,719 as against Rs. 2,470 in May. ACC shares are down to Rs. 1,150 from Rs. 1,292, while ICICI Bank is down to Rs. 1,237 from Rs. 1,093. Axis Bank shares have fallen to Rs. 1,550 from Rs. 1,210 in May, while JP Associates has nearly halved to Rs. 47 from Rs. 83.

If you look into the Mid caps stocks All Infra and Reality stocks are well below thei 2013 Highs. Famous Mid Caps Like R power, GMDC, ADAG Stocks  Small Caps are still trading 80% below there 2008 High suggesting Retail investor has not gained anything out f this rally. Mid caps have lost 40% and Small Caps are still down 57% from high on 2008

If you have picked IT, pharma and FMCG in your portfolio, you should be smiling (all the way) to the banks, but if you have picked any of these eight names you would be scratching your head

So an index, such as Sensex, is unfortunately not the best indicator of the market for investors trading in stocks, So Till we do not have a Broad based rally New High on Sensex and Nifty is just for statistical data nothing from traders or investor perceptive.

In Classical Bull Market mid and small cap indices should also be at 52-week high and same is not the case in current rally. Its basically a liquidaty driven rally where money is going in few stocks which is driving Index Higher.FIIs have bought shares worth $15.35 billion so far this year.

To Summarize

IN 5 years since Jan 2008, Index has scaled the peak of ~21000.

TO an FII, it feels that Sensex is up to 41,735 pts. (index adjusted only for the top 15 stocks with highest FII holding)

TO non-FIIs, it feels that Sensex is down to 16,780 (index adjusted only for the top 15 stocks with least  FII holding)

To a retail investor it feels like Sensex is down to 9044 points.  = down 56% in 5 years. (Sensex rebased with the performance of the BSE Small cap index)

To a retail investor it feels like Sensex is down to 12728 points.  = down 39% in 5 years. (Sensex rebased with the performance of the BSE MID cap index)

4 thoughts on “Sensex at life highs but No Fireworks for Retail Investor

  1. Chetan patel

    Sir your observation in last column written in blue colour is a very beautiful observation and a fine analysis to you sir great job

  2. Immortal

    so firangs are basically taking exposure on companies that are linked to their own economy or having leadership position in their domestic earnings and stayed out weaker segment of the market….Also they have outrightly rejected the tall claims of current government of economic slump bottoming out….I find them absolutely sensible in their decision to not take exposure on companies that are dependant on domestic economy as the forecast continues to be bleak in the near future….don’t see a reason why people are complaining of false or fake rally…yes the valuation appears stretched if u incorporate earnings growth of those select 15 stocks but they will correct with time as and when other sectors start performing and the need for portfolio rebalacing arises vis-a-viz their weightage….in fact the forward pe is currently close to its long term average as against excessive valuations on last 2 occasions when nifty hit 6300 levels..it’s actually averaging out the weak performers at the index level

    The only risk I see currently is excessive concentration of free float equity share in index companies by FIIs….these players can now at their will move our market and we live and continue to rejig our portfolio basis their liquidity and performance in their ground economies

    Index committe must seriously rethink on geographic classification of the earnings of companies and their weightage in the index given excessive globalisation and similarly the global participation in our market……it is completely misleading to have your main index which is barometer of economy to under represent your domestic economy linked stocks

    May god save my country from firangs ….let people at the helm be aware of the history and not be guided by short term solutions to fix cad numbers….all the best!

  3. Ram Ganesh

    Dear Bramesh Sir, Do u believe that this is a show by FII to hold NIFTY/BSE Sensex up and then convert all longs to shorts and fool the Indians alias Retail Investors and make more money? Do you see a CAP for NIFTY/Sensex and is there any chance of NIFTY taking U turn from here? Please share your views of NIFTY in the coming months if possible.

  4. Sekhar

    Hi,

    actually the bench mark index is BSE 500, not sensex or Nifty.

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