BSE Broad and Sectoral Indices Returns
(A new blog post is available here with an update of the information as of 31Dec2021)
BSE Sensex reached all-time high yesterday. So are other indices from BSE Limited and NSE Limited. Sensex closed at 60,048, while Nifty 50 closed at 17,853 on 24Sep2021.
Year-to-date, Sensex delivered a return of nearly 26 per cent, whereas BSE Mid cap and BSE Small cap indices delivered a return of 40 and 55 per cent respectively. Among sectoral indices, metals, basic materials, realty, information technology and power have done well this year.
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The broad and sectoral indices returns are as follows:
Table 1: Annual Returns:
If you observe the returns in the table 1 above closely, you will notice that Sensex and BSE 500 indices have given negative or negligible returns in 2013, 2015, 2016, 2018 and 2019. Only in 2014, 2016, 2020 and 2021 we've seen some decent returns.
But if you look at table 2 below, the one-year, three-year and five-year trailing returns look spectacular due mainly to recency bias of tremendous returns Indian stocks have witnessed since the COVID-19 pandemic lows of March 2020.
Among sectors, stocks in information technology, healthcare, FMCG and banking have done well over 10 years (see table 2 below). The leadership changes among sectors every year as can be observed from the annual / calendar year returns (table 1 above); the same goes for large-, mid- and small-cap stocks.
As compared to the US and other markets, Indian stocks have underperformed over a period of five to 10 years. But in 2021, India has outperformed other markets.
Table 2: Trailing returns:
You could look at the difference in returns between Sensex and Dollex 30 indices in the above tables. The difference represents the changes in the US dollar and Indian rupee (USD-INR) exchange rate. For example in 2013, Sensex delivered a return of positive nine per cent (table 1 above), whereas Dollex 30 index returned minus 3.5 per cent--as Indian rupee depreciated heavily against the dollar in that year.
And if you look at table 2 above, the 10-year annualised return (in rupee terms) for Sensex is 14 per cent, whereas the Dollex 30 delivered an annualised return of just 9.5 per cent (in dollar terms). The difference is reflective of the heavy depreciation of rupee versus dollar between 2011 and now.
Launched in 2001, BSE Dollex 30 consists of the same 30 stocks that are in Sensex, but the former is expressed in US dollar terms--so it is impacted by the dollar-rupee value.
Now coming back to Sensex, trailing returns give a distorted picture; hence it's better to look at annual returns for a better perspective of market returns.
It may be mentioned in the Sensex, BSE 500 and BSE AllCap indices, the stocks belonging to Banks, Finance, information technology, oil and gas, fast moving consumer goods (FMCG), pharma & healthcare, transport equipment and capital goods have the highest weights. Data for sectoral indices in the above two tables is given approximately in the order of the weights (free float) in BSE AllCap index.
The following table gives the weights of the sectors in BSE AllCap index:
Table 3:BSE AllCap sector weights as on 23Sep2021:
The total market capitalisation of all BSE listed companies reached Rs 261 lakh crores yesterday. As can be seen from the enclosed image, the total number of listed companies on BSE stock exchange is more than 4,000.
To sum up, equity returns are highly volatile. Investors tend to rotate among stocks and sectors. Even institutional investors can't escape this proclivity towards sector rotation. One year, healthcare stocks do well, the next year not so as we've seen in the past two years. In some periods, stocks in other sectors do well.
Instead of looking at trailing returns, it's better to be aware of the volatile nature of stock markets and look at the pattern of annual (calendar year) returns. If you find interesting patterns ahead of others, you're likely to beat the market.
References:
Value Research annual returns
Value Research trailing returns
BSE sectoral indices levels as on 24Sep2021:
BSE broad indices levels as on 24Sep2021:
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Disclosure: I've vested interested in Indian stocks and other investments. It's safe to assume I've interest in the financial products discussed, if any.
Disclaimer: The analysis and opinion provided here are only for information purposes and should not be construed as investment advice. Investors should consult their own financial advisers before making any investments. The author is a CFA Charterholder with a vested interest in financial markets.
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He blogs at:
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