Mere Paas Sensex Hai !

 

Mere Paas Sensex Hai !

Dr. Virendra  V. Tatake

The BSE benchmark Sensex is well-known to ordinary investors. Further as Sensex has recently reached the highest level in the history of the stock market, it has become a topic of discussion and curiosity for a common man. Investors often wonder if they can buy the Sensex.

The Sensex is comprised of 30 most liquid and best performing companies on the Bombay Stock Exchange. . The Sensex, which had a base level of 1978-79, started at 100 and has gone through many ups and downs to reach its highest level. It is a number created with the help of an equation to predict the direction of the stock market, so it is not possible to buy it directly from the stock market. The Sensex can be bought buy purchasing shares of the companies involved. Of course, investing large sums of money in order to buy shares of these 30 companies and keeping an eye on the changes in them is not easy for the average investor. Also in the Derivative market, Index Futures can be traded in the Sensex, but it carries high amount of risk.

Index Mutual - An easy way to buy Sensex.

The Sensex-based index fund buys shares of all Sensex companies in the allotted amount. Any ordinary investor can start investing in such a fund by investing a minimum of Five Thousand Rupees or a minimum of Five Hundred Rupees per month. This means that the desire to buy the Sensex can be fulfilled through an Index Funds. Such funds have many advantages. Such a fund provides an opportunity to invest in the shares of the top 30 companies with the highest market value in the stock market. Also, investing in stocks of the wrong companies is not likely to hit investors. Index fund managers are having easier task as compared to other fund managers as they have  to invest in selected stocks only. That is why the costs of such funds are low which indirectly benefits the investors in the form of returns.

The Sensex, which started at 100 in 1978, has so far returned about 16 per cent annually. Simply put, the current market value of an investor who invested Rs 10,000 in the Sensex in 1978 is now more than Rs 50 lakh. Of course, such a person cannot be found because in the year 1978, index fund was not started in our country. Compared to western countries, we came up with the concept of index fund late and even today such funds are not well known to the investors in our country.

Investors can also invest in index funds based on the national stock market index Nifty.

What should investors do?

Every mutual fund investor should have some index fund in his / her portfolio. World-renowned investor Warren Buffett has also suggested investing in low-cost index funds.

Of course, as mentioned earlier, the Sensex has now reached its highest level and the PE ratio of the Sensex has reached 32. This means that the Sensex has become very expensive and one-time big investment should be avoided. Instead, long-term SIPs should be made in such funds. At the same time, if Sensex collapses in the near future, you should be prepared to invest large lump sum amount in the same fund. Given the current volatility in the market, regularity and consistency in investing will be very important.

 An investor who invests in an index fund in this way can proudly say in future -  " Mere Paas Sensex Hai !"

 (The author is associated with Indira Global Business School as a Director)

                          

       

Dr. Virendra Tatake

Director

Indira Global Business School, Pune.