Indian Markets-Our Econmic Barometers

SENSEX.........Most of us might be wondering what this 6digit word has to do with our daily routine but i am afraid we need to revisit our views after my fact file of our SENSEX

SENSEX stands for "Sensitive Index".

However theoretically it's based on the complex working of our stock exchanges but trust me

"SENSEX is not LOGICAL but PSYCHOLOGICAL"

BOMBAY STOCK EXCHANGE (BSE)

The Bombay Stock Exchange Limited located at Dalal Street was previously known as "The Stock Exchange- Mumbai" is now popularly known as the BOMBAY STOCK EXCHANGE is the oldest stock exchange in Asia. The Bombay Stock Exchange was established in 1875.
The Bombay Stock Exchange BSE SENSEX (BSE 30) is a value-weighted index composed of thirty companies. The base value of 100 being set in April 1979.
Each company listed in BSE-30 is assigned a weight which determines the sensitiveness of the index of fluctuations in each stock.

NATIONAL STOCK EXCHANGE (NSE)

The National Stock Exchange of India (NSE) was incorporated in November 1992 as a tax-paying company. It is recognised under Securities Contracts (Regulation) Act, 1956 in 1993 as a stock exchange. I
n June 1994, it commenced operations in the Wholesale Debt Market (WDM). In November, the same year, the Capital Market segment commenced operations and the Derivatives segment in June 2000.

From our tooth brush to blanket every thing we use in our daily regime is to a great extent influenced by this sensitive index.

SENSITIVITY OF INDEX

Many People has always wondered how news or different factors has an effect on stock prices. Essentially, It has two parts

First- The type of News of Factor
Second- Its nature, i.e. positive or negative

One has to be smart enough to decode the news and take the position quickly in the stock. People who are adroit in this do make good short term gains even if we leave the insiders or fund houses that generally have good information much before the release of news (I presume so).

I was reading an article from some research paper that did a study on relationship of fund house investment and their holding in a particular stock. What they found out was most of the fund houses exit the stock much early than the release of numbers by the company.

Considering above I think there is little opportunity but then chances are that news is there in market and fund houses are smart enough to read the signs. What individual investors look for is immediate gains but if they play right on news than chances are sooner of later one might see the results.

As I write, I don’t see many clues about anything except that at times it does work. So if it does than why not try it through paper trade to start with.

Below are different types of news that affect stock price. Keep your eyes and ears open and try to come out with a pattern. Who knows it might work for you. Good Luck.

1. Crude Prices
2. Macroeconomic Data (IIP, Inflation, GDP, Industrial Growth, Consumer confidence,Employment, Unemployment etc)
3. Government/Politics
4. Draught/Monsoon
5. Federal Policies (Interest Rates, Monetary Policies)
6. Company Results
7. Global Cues
8. FII activities
9. Stock Manipulations
10. Insider Trading
11. Mergers
12. Acquisitions
13. Money Markets
14. New Orders
15. Buy Back
16. Bonus
17. Split
18. Tax Benefits
19. Change in stock Group
20. Inclusion in an Index
21. Loss of customer
22. Short and Long Positions
23. Spinoff of arms
24. Lawsuits (win or loss)
25. Change in Demand
26. Change in Supply
27. Budget
28. Raw Materials
29. War
30. Terrorist Attacks
31. Management Changes
32. Dividend
33. Rights Issue
34. Joint Ventures
35. Business Expansion
36. New Invention
37. Rumors

Does SENSEX Rise and Fall mean anything to us?

“ I really never understand why there is so much euphoria when sensex goes up sharply.It is simply exchange of money from one hand to other. So some is making profit at the costof others. What rationale can there ever be in purchasing a thing worth Rs100 at Rs1000 ?Does high sensex contribute directly to GDP? Only some industrialist benefit,they can garner fund at cheap rate if market is buoyant.”

Yes Sensex rise does contribute directly to GDP; Rise of Sensex gives money to the promoters and other secondary investors who have already invested so that they can use this capital to start new projects or they can spend money on lavish lifestyle both of these promote economy. The new investor also gets benefited by investment in due course if the company he has invested is growing.

Further to this Government charges security transaction tax and capital gains tax so with rise in stock market government kitty also increases which should benefit nation if there is a prudent government.

Are stock market transactions purely making profit at the cost of others ? The answer can be yes and no both. For short term speculators it is making profit on cost of others but for long term investors it is investing in a growing company and may own control of a profit making or strategic enterprise.

If the economy is in recession and the companies are showing loss then investors will loose. Nikkie of Japan was at 38000 levels when Japanese economy was booming in 80s. In the years of recession in Japan it came down and now it is at round 19000. But did Japanese government banned stock market? The answer is no because at that time banks were giving negative interest (charging money to keep in account) so raising money in market was still better.

What Japanese people did in that scenario to beat inflation? Simple they invested in oversees hedge fund.

This is my genuine effort to laminate the fact about SENSEX and its importance. I regret any errors if noticed.