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Taking stock

india Updated: Aug 19, 2009 02:06 IST
Bhartendu Sood

Our media went gaga over the Bombay Stock Exchange’s 30-share index touching the 15,000-mark, as if it meant a windfall for all investors. The real fact is that only a few have profited from this rise. This index is unrepresentative of the stock market and that is proved by the fact that it has only 30 out of the 7,000-odd companies listed on the bourses and doesn’t even have a single scrip of the important industrial sectors like textile, sugar and realty. Moreover, it is loaded in favour of a few high-performing groups and sectors.

If this index were a true reflection of the stock market then there wouldn’t have been a big difference in the increase percentages of BSE-30 and BSE-500, not to speak of BSE-7,000, which everybody is afraid to project for fear of losing investors. The interesting point is that while this index shows a yearly increase of 38 per cent (as on July 6, 2007), it is possible to cobble many such 30-share groups that may show a negative return during the same period.

On numerous occasions, the index’s vulnerability to rigging has been exposed; still, if the government has chosen to retain it as the face of the Indian stock market, it speaks of its spiteful motives.

For a minute, even if one goes by this index and takes into account that it took 213 days to move from 14,000 points to the 15,000-mark, the return works out to be 11.4 per cent. This is nothing to gloat over, when one considers that brokerage, stamp duty, STT payment and money spent on telephone calls and auction bills etc, which crop up even with due diligence, can reduce this return to a single digit. Not to speak of the hassles a small investor is put to while tracking the world markets. Is this modest 8-9 per cent return worth all the tension and risks involved? To me bank deposits, which give a return of 10 per cent without such risks and problems, is a much better option.