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The Index has already crossed its peak!

Oct 13, 2006

While the media is busy trying to figure out whether the BSE-30 Index will cross the magical peak of 12,612 points reached on May 10, 2006, the good news is that the true index of performance, the BSE-30 Total Returns Index of the same 30 stocks in the BSE-30 Index has already breached the previous peak on September 29th and established a new peak on October 12th 2006 – yesterday. The BSE-30 Total Return Index is an Index of the same 30 stocks as in the BSE-30 (Sensex) Index with one key differential i.e. all dividends and bonus or rights issue benefits are also taken into account to arrive at the Total Return an investor would have received.

Markets at new peak already!
(Points) May 10,
2006
September 29,
2006
October 12,
2006
% from May 10th peak
BSE-30 Index 12,612 12,454 12,538 -0.6%
BSE-30 Total Return Index 15,600 15,672 15,777 1.1%
Difference between
BSE-30 and BSE-30 TRI
-19.2% -20.5% -20.5% Represents excess returns from
dividends, rights, bonuses

So, while the bulls and bears will be busy on national TV channels fighting over whether the market has reached a new peak of not, remember that the BSE-30 Total Return Index has already established two new peaks since May 10.

So, what does that mean? As we have maintained in the past, the level of index should not influence one’s decision to invest in stocks. At the end of the day, it should be based on the risk-return profile and the future financial needs. We believe that the risk-return trade off, at the broader level currently, is skewed towards risks purely based on valuations. While there are exceptions to the same, investors must have a two to three year investment horizon to capture the upside. Happy investing!


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