From 60k to 60k: The rise and fall of Sensex explained in charts

(This story originally appeared in on Aug 17, 2022)

NEW DELHI: The benchmark BSE sensex has had a bumpy ride since scaling its all-time high level of 62,245 in October last year. The index did go past the 60,000-mark on 2 occasions this year, but could not hold on to it for long.

On Wednesday, after 178 days, BSE sensex again breached the psychological level of 60,000.

However, given the uncertain geopolitical situation, it will be interesting to see for how long it can sustain above the 60,000-mark. An important point to be noted here is that the economic scenario — both domestic and global — is completely different today from what it was back in October 2021.

Having said so, the benchmark index has shown decent performance in the last 2 months. At the current level, it is at its highest since January.

Here’s a look at sensex’ journey from 60k to 60k:

FY22 belonged to the bulls

It’s been no less than a rollercoaster ride for the stock markets. When the BSE sensex touched 60,000-mark for first time in October 2021, the overall market sentiment was positive. Both sensex and Nifty were having a remarkable 2021. It scaled multiple highs beginning from 50,000 in January to 62,000 in October.

Overall, the index surged 9,059.36 points or 18.29% higher in FY22, despite challenges like state-wise lockdowns during the second and more devastating wave of Covid-19 to headwinds from global markets.

However, domestic indices emerged to be the best performing index among global peers in FY22.

Russia-Ukraine war

The war in Ukraine from February posed a major challenge for stock markets and businesses across the world.

During the initial days of the war in February, markets had come severely under pressure for good 15 sessions, leading to loss of over Rs 15 lakh crore for the BSE investors.

With the war creating a rage in Ukraine, oil prices soared to record levels amid repeated sanctions by the United States and allies, European Union and the United Kingdom.

India being the third-largest importer of crude oil, feared rising prices will push up its trade and current account deficit, while hurting the rupee and fueling imported inflation. All this made investors jittery and they continued to lay off stocks.

As Russia invaded Ukraine on February 24, sensex witnessed one of its worst crashes in the last 2 years.

Ever since the pandemic-induced crash in March 2020, investors had gained significantly leading to more people joining the markets looking to earn higher returns. However, despite gains there were certain bad days for the markets as well.

War-induced inflation

With major trade routes of Russia and Ukraine being inaccessible in wake of the war, economies started feeling the pressure of rise in prices of key commodities. Sanctions imposed by various countries on Russia made matters worse.

In a way, we can say that Russia’s war in Ukraine has been the biggest bugbear for the global economy in 2022-23. Directly or indirectly, it raised the prices of a vast range of things – from oil, wheat, food and cooking gas, soaps and cosmetics, cars and city transport, steel and aluminium, to flight tickets and shipping freight.

As a result, inflation spiked in almost every country, forcing central banks across the globe to raise interest rates. Between April and May, almost 21 countries witnessed a hike in key lending rates. This cautioned investors further.

Imported inflation led to rate hike, fall in rupee

For India, most of the inflation was imported. It’s consumer price index (CPI)-based retail inflation surged to 8-year high of 7.79% in April mainly on account of rising food and oil prices, which surged as a result of global prices and falling exchange rate.

This made import of key inputs like oil, metals, coals and fertilisers costlier. Besides, a falling rupee added to the Reserve

‘s (RBI) woes.

Consequently, the central bank started hiking interest rates since March, much to the dislike of investors. In an off-cycle meet, it raised repo rate by 40 basis points to 4.4%, first time since August 2018.

The BSE sensex reclaimed 60,000-mark for a brief period of 2 days in April but started falling since. After RBI’s 2nd rate hike in a row in June, markets fell further. On June 17, sensex fell to a low of 50,921 intra-day, tracking subdued cues from both domestic and global markets.

The US Federal Reserve was also raising interest rates to curb inflation that had soared to 40-year high of 9.1% in America, making investors even more jittery about global market scenario.

Policy measures by RBI, govt

The global economic situation posed a major challenge for RBI — whether to keep interest rates low to revive a slowing economy or to raise them to tame inflation. Eventually, it chose the latter.

Since the off-cycle meet in March, RBI has raised rates by 110 bps. In few months, repo rate was hiked from 20-year low of 4% to pre-pandemic level of 5.4%.

In addition, to curb price rise and increase domestic availability, Centre restricted wheat, sugar exports from India.

Meanwhile, the RBI also intervened to stop rupee’s fall as the Indian currency had plunged to record low level of 80 against US dollar. The central bank intervened in spot, forwards and non-deliverable forwards market.

As a result, retail inflation cooled for 2 consecutive months and now stands at 6.7% in July. Although this was much above the RBI’s threshold limit of 6%, the reading was a five-month low figure that enthused investors, market players said.

In addition, on Tuesday government data showed that the wholesale inflation too had moderated to 13.9%, from over 15% in June.

This added to investors’ optimism that the inflation rates in India had peaked and the RBI would be slow in raising interest rates in its next rate-setting meetings.

18% jump in 40 days

From its recent low level of 50,921 on June 17, the BSE sensex witnessed an upward trajectory in almost every trading session. It took 40 days for the index to scale past 60,000-mark.

Interesting, sensex took less number of days to scale up back to 60,000 than over 50 days when it fell from 60,845 in April to 50,921 in June.

FIIs turned net buyers again


Foreign institutional investors (FIIs) have been pumping money into Indian equities again. In August till now, they had bought shares worth Rs 16,218 crore.

This is in sharp contrast to previous months when FIIs were only interested in withdrawing their money from Indian equity markets. In July, they had recorded an outflow of Rs 6,567.71 crore.

However, the outflow in July was much lower than that in previous months. For example, in June itself FII outflows amounted to Rs 58,112.37 crore.

Between October 2021 till June 2022, FPIs sold Rs 2. 46 lakh crore in the India equity markets.

How broader markets performed

Both midcap and smallcap stocks have performed well for over a month now. Returns to investors from this segment has remained consistent.

The indices came under pressure in the initial stage of Russia-Ukraine war, but recouped losses quickly.

While midcap stocks gained 13.14% since February, small caps have 11.62% returns to investors during the same period.

How investors lost, then gained

The buoyant trend in sensex helped investors gain over Rs 59.75 lakh crore in the 2021-22 fiscal. The market capitalisation of BSE-listed firms rallied from Rs 2.4.30 lakh crore at the beginning of this fiscal to Rs 264.06 lakh crore by March 31.

M-cap had jumped to an all-time high of over Rs 280 lakh crore on January 17 this year. However, just when everything was looking to recover, Russia’s invasion of Ukraine flipped the situation.

As a result, m-cap of BSE listed companies fell to a low of Rs 241 lakh crore as of March 2022. Consistent inflationary pressures and uncertain global economy in June further pushed down the m-cap to Rs 237 lakh crore.

However, with recovery in markets since June, m-cap has now surged to Rs 279 lakh crore.