Mumbai, April 10: The revamped Sensex has indeed moved at a faster rate thanits unchanged version might have moved. This was on expected lines as thenew additions in the index include market favourites Zee Telefilms andSatyam Computers. The inherent volatility in these scrips and the fact thatthey have high betas (averaging over 1.2 per cent during the last year onthe NSE) will generally result in a faster moving and hence more volatileindex.For instance, the new inclusions in the index contributed to around 45points in the total gain of 224 points on Monday. This can be ascertained bydoing a comparison of the revamped index with that of the unchanged one.While the market value of the revamped index has increased by 4.3 per cent,that of the unchanged one has risen by only 3.4 per cent. In point terms,the unchanged index would have risen by only 178.5 points, resulting in anindex level of 5397.7. This is clearly 44 points short of the close of 5442.Although this is mainly because the new inclusions have moved at a fasterrate, it has nothing to do with the exclusions. This can be said becausethese scrips had a cumulative weightage of hardly 2 per cent in the index.
The old index has moved at a slower rate mainly because of the fact that theold economy heavyweights in the index including HLL, ITC and Reliance etc.have risen at lower rates compared to their new economy counterparts. Eventhough these scrips still enjoy a considerable weightage in the revampedindex, the weightages are much lower.
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