BSE SENSEX is the popular equity index of BSE. It is one of the most widely used index. SENSEX made its debut on April 1, 1979 with a base value of 100. Being the oldest index in the country, it provides the time-series data over a fairly long period of time. It’s been more than 40 years and the journey of SENSEX is just remarkable.
It has followed an upward trend in spite of all the major events and highs and lows. Some of the major events in the life of SENSEX were:
1991: Economic Liberalisation-
It refers to the economic liberalization of country’s economic policies with the goal of making the economy more market and service oriented and expanding the role of private and foreign investment. The collapse of Chandra Shekhar government in the midst of crisis and the assassination of Rajiv Gandhi led to election of a new Congress government led by P.V Narsimha Rao. Some unsuccessful attempts were made earlier in 1966 and early 1980s, a more thorough liberalization was initiated in 1991. Specific changes like reducing import tariffs, deregulating markets, and reducing taxes, led to increase in foreign investment and high economic growth in the 1990s and 2000s. This led to an increase in India’s GDP and a rise in SENSEX.
Harshad Mehta Scam- Right after that happened the biggest scam in the history Indian Stock Market. Harshad Mehta Scam or 1992 Indian stock market scam was a market manipulation carried out on BSE by Harshad Shantilal Mehta with other bankers and politicians. It was a very systematic stock fraud using bank receipts and stamp paper which caused the market to crash. The scam resulted in complete reformed system of stock transactions including online security systems, as it exposed all the loopholes of Indian financial system. From a Rs. 2,500 billion market, around Rs. 35 billion was withdrawn, causing share market to collapse.
Dot-com bubble- Dot-com bubble or the Internet bubble, a period of massive growth and adoption of internet. This bubble started around 1997, it peaked in 2000 and lastly it burst by 2002. It revolved around the speculative investments in Internet companies. Investors were too excited about progress of Internet, and they invested in pretty much every company without thinking about its profits or losses. It reached a peak, but fell down pretty fast. It is regarded as biggest and fastest rise and fall in the business history.
Subprime Crisis- US introduced the subprime loans to credit the poor section. There was success in providing the subprime loans. Global financial investors around the world were involved in the subprime mortgage. Earlier the demand for the loans was higher than the supply. But in the subsequent years, this changed and there was excess supply in the market. Real estate market began to cool down and house prices began to fall. Due to this, financial institutions started withdrawing from the banks and borrowers couldn’t repay their loans. Thus, banks were under crisis which led to a global recession. While the growth had been stellar but the Sensex could not hold on and plunged to less than 8,000. the Sensex was below 7,700-mark in October 2008, erasing major gains made over the last many years.
Satyam Scam- Satyam computer was an IT company established in 1987 in Hyderabad by Raju brothers. Tensions began when the brothers decided to merge with the company, Maytes. After the merging of the two companies, various legal issues in this case began. Ramalingam Raju used to manipulate their financials a lot, he used to show revenues, operating profits, etc. at a very inflated rate. He faked his invoices, bank statements and profits, and attracted investors to invest, which led to a sharp rise in company’s share prices. With increase in operations, gap between original and fake figures increased, and due to recession in 2008, he couldn’t bridge this gap. Even the stock prices fell sharply. And so, B Ramalinga Raju confessed to a huge financial manipulation to the tune of Rs 50.4 billion in account books of Satyam. After that, the Government and SEBI took various steps to tighten the grip on such offenders. Under the Companies Act of 2013, they brought several new regulations. Now, at every 10 years, companies are obliged to change their auditors.
There have been many more historic events in the life of SENSEX like the start of UPA decade, European debt crisis, NDA government, PNB scam, Vijay Mallya case and the most recent COVID-19 pandemic. In spite of all the major historic events, SENSEX continued to maintain an upward slope over the years. Starting with a base value of 100, it has now crossed 50k mark. SENSEX has covered and will continue to cover a remarkable journey in future. “If you look at the chart of Sensex since the beginning, you will be able to see that when India smiles, the Sensex smiles, and when India cries, the Sensex cries too. It is a witness and representation of India’s victories and struggles, its hopes and worries. It is a measurement that shows India in its myriad true colours every micro second,”, said Ashish Chauhan, chief executive officer, BSE Ltd. And I think that’s truly accurate.