Sunday, Nov 27, 2022
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Economy

Making Sense Of The Sensex

There's little economic rationale in the index's movements

Making Sense Of The Sensex
Making Sense Of The Sensex
outlookindia.com
-0001-11-30T00:00:00+05:53

IS a soaring Sensex telling you good things about the economy? Experience suggests otherwise. Since January 1997, the Sensex has surged twice; a third surge is under way. Yet, each 25-30 per cent rise in the index has flown straight in the face of declining growth in gdp and/or industrial production.

These economic woes have seen corporate profitability decline for two straight years, and a further decline for 1998-99 is certain. But through 1998-99, when net profit margins dipped from about 6.5 per cent to 5.9 per cent, the Sensex plunged from over 4,300 points to 2,741 points before leaping back 37 per cent to 3,743 points now.

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