Home / Markets / Stock Markets /  Pvt  banks,  IT weigh 17-28% more in Sensex since ’90

With the Sensex closing above the 50,000-mark for two consecutive days, sectoral representation has seen a massive change in the last 30 years in-sync with changes in the underlying economy.

On Thursday, market capitalization of companies listed on the BSE touched a new high of 200 trillion with the Sensex gaining 6% this year. The BSE Sensex jumped 358.54 points or 0.71% ending at 50,614.29. The 50-share index Nifty gained 105.70 points or 0.71% to close at 14,895.65.

The Sensex has surged over 90% from the lows of March 2020, primarily led by global liquidity, recovery in corporate earnings and expectations of a faster economic revival, driven by the growth-oriented budget proposals for financial year 2022. However, the journey to 50,000 has been jittery and challenging with the economic slowdown and, most recently, the covid-led disruptions leading to a big crash in March 2020.

The index started trading in 1986 at 549, while setting the base year of 1978-79 as 100.

“While traversing its journey from 549 to 50,000, the Sensex, up 91 times, has delivered 13.6% CAGR (compounded annual growth rate) returns in the last 35 years. While the returns have been impressive, this has been a non-linear journey," said Gautam Duggad and Jayant Parasramka, analysts, Motilal Oswal Financial Services.

In the last 35 years, the Sensex has given annual returns of over 20% over 14 years, while it fell more than 10% over seven calendar years. However, in the journey to 50,000, many sectors gained prominence while few faded out completely in their weightage on the Sensex.

For instance, at present, private banks have a weightage of 28.5% and technology 17.7% and non-banking financial companies have 12.4%. In 1990, these sectors had zero weight in the Sensex.

Sectors that have gained weight in the Sensex since 1990 include oil and gas (from 7.3% to 12%), largely on account of Reliance Industries, while healthcare and utilities saw minor increase in weights.

Cement and capital goods have seen massive decline in weights to 1.3% and 3.4%, respectively, in 2021 from 12.5% and 10% in 1990. With Tata Steel being replaced in the Sensex with Dr Reddy’s Laboratories Ltd last December, the Sensex has zero representation from metals—a sector which had 26.3% weight in 1990.

Similarly, fertilizers (5.8%), textiles (4.3%), shipping (2.5%), paper (1.6%), and hotels (1.0%) are no longer a part of the Sensex. Consumer and auto weights have dropped to 10.2% and 4.3% in 2021 from 14.7% and 12% in 1990.

According to Duggad and Parasramka, following the change from manufacturing to services over the past three decades and the rise of the private sector post-liberalization, the sectoral representation in the Sensex in 2021 is vastly different from that of 1990. Only four companies, Reliance Industries, Hindustan Unilever, ITC, and Larsen and Toubro, have been a part of the index’s journey since inception.

The combined market-cap of these four companies has grown at a CAGR of 23% between January 1988 and February 2021.

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