SENSEX finally closed above mountain 50k
Not many investors might be aware that BSE SENSitive IndEX (SENSEX) was first published on 2nd January 1986 though base value of SENSEX was taken as 100 as on 1st April 1979. SENSEX is regarded as pulse of the domestic stock markets in India, comprising free-float market weighted equity index of 30 sound companies from various sectors of Indian economy. It has taken 41 years 10 months and 3 days for SENSEX to close above 50k i.e. Rs 100 invested in SENSEX on 1st April 1979 has become 500 times more during this period though 30 stocks composition of the index kept changing from time to time. Out of the initial 30 companies, just 6 continue to be part of SENSEX now - Reliance Industries, ITC, Hindustan Unilever (HLL), Larsen & Toubro, Mahindra & Mahindra, and Tata Steel. Two companies Mahindra & Mahindra and Larsen & Toubro moved out of SENSEX in January 2002 and May 2004, to re-enter SENSEX in September 2004 and after June 2006 respectively.
Liquidity Driven Equity Markets
Post announcement of complete lockdown on account of Coronavirus, SENSEX registered worst ever one-day crash of 3934.72 points or over 13% plunge on 23rd March 2020, to close at 25981.24 points. Stock Exchanges continued to function throughout complete lockdown period, albeit, with short-selling restrictions. The companies from IT, Pharma, FMCG, Stock broking sectors continued to perform well whereas hospitality, aviation, real estate companies took a massive beating. The worrying factor for veteran investors, equity experts and market analysts - is the phenomenal rise of indices during pandemic that is not commensurately supported by the financial or economic indicators. GDP declined by historic 23.9% YoY during June quarter followed by 7.5% YoY drop in September quarter. Indian economy has entered into a technical recession with two consecutive quarters of negative growth. Strong and highest ever FPI inflows in equities amounting to Rs 60,358 crore, Rs 62,016 crore and Rs 19,473 crore during November 2020, December 2020 and January 2021 respectively, has taken SENSEX to a historic closing high of 50,255.75, almost doubled from March 23, 2020 low. The fundamental question remains to be answered is how long incessant FPI inflows witnessed in Nov-Dec 2020 would continue in future. Therefore, let us take a look at top 3 listed companies, in terms of market capitalization, performance and financial indicators to understand fundamental soundness of these companies.
Top 3 listed Companies on Indian Bourses
In terms of market capitalization, Reliance Industries, TCS and HDFC Bank continue to rule Indian stock markets. Incidentally, these companies also command top 3 positions in terms of absolute net profit when one peruses annual or quarterly profits. While RIL was founded in 1966; TCS in 1968; and HDFC Bank in 1994, these companies first went public in 1977, 2004 and 1995 respectively. RIL is conglomerate with presence in oil, gas, textile, telecommunication and retail sectors; TCS is a leading IT/software company; and HDFC Bank is top private sector lender in Indian Banking Industry.
(Rs in crore)
IT companies have always been commanding higher PE ratio considering future outlook, which applies to market leader TCS as well. HDFC Bank PE ratio though not highest in the banking industry, yet consistent all along. Reliance Industries share price has gained significantly after almost 10 years of muted growth. RIL has done exceptionally well during pandemic period when it mobilized large investments in Jio Platforms and Reliance Retail. HDFC Bank is fast catching up TCS when it comes to net profit. In fact, HDFC Bank has beaten TCS as far as Q3 Net Profit figures are concerned. Reliance is far ahead of other two contenders in terms of net profit that is likely to be higher in the coming days, as company has become net debt free during current financial year. It would be interesting to track quarterly performance of these 3 darling stocks of investors on the bourses.
Please keep watching this space for interesting updates on equity markets!
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