The BSE Sensex may be once again at 18,000 levels, after two and a half years, but several of its components have either been left behind while some have been left out altogether. On Thursday, the benchmark closed at 18,113, its highest closing since February 15, 2008, when it was at 18,115. Between February 15, 2008 and July 22, 2010, there have been five new entrants to the club of thirty, namely, Hero Honda, Tata Power, Sterlite Industries, JP Associates and Jindal Steel. They have replaced Bajaj Holdings, Ambuja Cements, Grasim, Ranbaxy and Satyam Computers.
An analysis of the contribution made by stocks to the movement in the Sensex, during this time, shows that Reliance Industries, with about a 13.5% weightage, contributed a negative 442 points, with its share price eroding 18%. ICICI Bank, which has declined about 24%, between then and now, has been the biggest laggard in the index, taking it down by 490 points. The biggest contributer in terms of index points has been IT major Infosys, which contributed 783 points to the index with the share price gaining 9.5% in the two half years. The next biggest contributor is ITC, which has chipped in with 328 points, followed by TCS, which has contributed 290 points.
In terms of percentage gains in their share prices, the leaders have been M&M, which has more than doubled, followed by TCS, which has gained 93% and Cipla, which climbed 78%.However, these stocks have a relatively smaller weightage in the Sensex. The losers are Reliance Communications, which plunged 69%, followed by DLF which dropped 63% and Tata Steel, which fell 34%. The Reliance pack?both Mukesh and Anil Ambani group stocks?have been negative contributors to the index in the move back to 18,000 from February 2008. In early 2008, the market had entered correction mode due to the breakout of the sub-prime crisis. Currently, the Sensex is just 13% away from its all-time high of 20,873, which it touched on January 8, 2008. The recovery has been quite remarkable considering that Sensex had plummeted more than 60% to 8,160 on March 9, 2009, but the performance of the Sensex in 2010 has been relatively subdued since it has gained just under 4%, notwithstanding the fairly robust foreign inflows of close to $9 billion. Despite its moderate gains, the Indian market has been one of the best-performer globally this year with many postingnegative returns. Sensex currently trades at a forward P/E multiple of close to 17 times. ?Valuations are looking stretched at the moment. But they will start looking attractive once the market starts looking at FY12 earnings,? said Ved Prakash Chaturvedi, MD, Tata Mutual Fund.
The market appears to be quite bullish and most brokerages have a Sensex target of 21,000-23,000. The consensus estimate for 2011-12 earnings per share is Rs 1,250 for the Sensex companies. Ambit Capital, for instance, expects the market to touch 23,000 by March 2011.