Is Investing in Sensex Worth It?

In this article, we will discuss

1. What is Sensex?
2. Historical Performance of Sensex
3. Why You Should Invest in Sensex
4. Cons of Investing in Sensex
5. Comparison of Sensex with Other Stock Market Index
6. Some of the advantages of BSE Sensex over other indices are:
7. Expert Opinions on Sensex Investing
8. Factors to Consider Before Investing in Sensex
9. How to Invest in Sensex

The stock market is an important part of the Indian economy. The Sensex is one of the most widely used indicators of its performance. The Sensex, short for the Sensitive Index, is a Bombay Stock Exchange (BSE) benchmark index. It tracks the performance of India's largest and most actively traded 30 companies. As an investor, you may wonder whether investing in the Sensex makes sense. The article highlights the answer of the question "Is Investing in Sensex Worth It?" by examining the basics of BSE Sensex investing, its advantages and risks, and the factors to consider before an investment. By the end of this post, you will better understand whether investing in Sensex is right for you.

What is Sensex?

Sensex is the most popular stock market index in the Indian Stock Market. It is one of the earliest Indian benchmarks. It consists of 30 chosen stocks from businesses traded on India's Bombay Stock Exchange (BSE). These 30 stocks are from some of the biggest companies and are the most commonly traded stocks. Sensex was started in 1986, and S&P runs it. The calculation is performed in both Indian rupees and U.S. dollars. It is market capitalization-weighted and float-adjusted. This indicator is an important aspect of the Indian economy. The Sensex today live is at 58955.53 as of March 31, 2023, at 03.15 IST, up 1.72%.

Historical Performance of Sensex

The Sensex tracks the performance of 30 major companies listed on the BSE based on their liquidity, trading volume and industry representation. It is a free-float market capitalization-weighted index with a base value of 100 as of 1978-79. The Sensex has witnessed many ups and downs since its inception, reflecting the changes in the Indian economy and the global markets. It has undergone several phases of bull and bear markets, recessions and crashes, and booms and busts. The table below shows the closing value of the Sensex for the last 5 years:

Year	Closing Value
2018	36068.33
2019	41306.02
2020	47751.33
2021	58,253.82
2022	60,840.74

Why You Should Invest in Sensex

Investing in Sensex, which is the benchmark index of the Bombay Stock Exchange (BSE), can have several potential benefits, including

• Diversification and Exposure

By investing in Sensex, you can own a slice of 30 of the largest and most influential companies in India, spanning across various sectors such as banking, IT, FMCG, automobiles, pharma and more. This means you can benefit from the growth and innovation of these companies without putting all your eggs in one basket. Diversification can reduce your risk and enhance your returns over time.

• Potential Growth

Sensex has been one of the best-performing indices in the world, with an average annual return of 14% since its inception in 1986. Sensex has also shown resilience and recovery during periods of crisis, such as the 2008 global financial meltdown and the 2020 Covid-19 pandemic. The NSE Sensex reflects the strength and dynamism of the Indian economy, which is expected to grow quickly in the coming years, driven by demographic dividend, urbanisation, digitisation, infrastructure development and reforms.

• Stable Investment Option

Sensex comprises well-established and reputable companies with a profitability and governance track record. These companies are less likely to face bankruptcy or fraud than smaller or newer firms. Sensex also has a low turnover rate, meaning its constituents stay mostly the same. This reduces the impact of market noise and speculation on Sensex's performance. Sensex can provide a steady and consistent source of income for investors through dividends.

Cons of Investing in Sensex

• Volatility

Sensex is not immune to the fluctuations and uncertainties of the stock market. Sensex can experience sharp declines or corrections due to interest rate changes, inflation, currency movements, geopolitical tensions, trade wars, natural disasters or pandemics. Sensex can also be affected by the performance of other emerging markets or global indices. Sensex may not be suitable for investors with a short-term horizon or low-risk tolerance.

• Affected by Global Events and Political Instability

The global economic and political environment and domestic policies and regulations influence Sensex. Sensex may face challenges or opportunities depending on the relations between India and other countries, especially its major trading partners such as the US, China and the EU. Sensex may also be impacted by India's political stability and governance quality, which can affect investor confidence and business sentiment.

• Conservative Option

Sensex is a relatively conservative investment option compared to individual stocks or sectors that offer higher returns and risks. Sensex may not capture the full potential of the Indian stock market, as it excludes many small-cap or mid-cap companies with higher growth prospects or niche advantages. Sensex may also need to catch up to other indices with a broader or more diversified composition.

Comparison of Sensex Today Live with Other Stock Market Index

Index	Number of stocks	Exchange	Base year	Base value	Sectoral representation	Investment Opportunity
Sensex	30	BSE	1978-79	100	Diversified across 12 sectors	High
Nifty 50	50	NSE	1995-96	1000	Diversified across 13 sectors	High
BSE Midcap	101	BSE	2002-03	1000	Diversified across 18 sectors	Moderate
Nifty Midcap 100	100	NSE	2003-04	1000	Diversified across 17 sectors	Moderate
BSE Smallcap	751	BSE	2002-03	1000	Diversified across 23 sectors	Low
Nifty Smallcap 100	100	NSE	2004-05	1000	Diversified across 16 sectors	Low

Some of the advantages of BSE Sensex over other indices are:

• Sensex is India's oldest and most widely followed index, with high credibility and recognition among investors and media.
• Sensex comprises India's largest and most liquid companies, with a profitability and governance track record.
• Sensex has a low turnover rate, meaning its constituents do not change frequently. This reduces the impact of market noise and speculation on Sensex's performance.
• Sensex today live is highly correlated with other global indices, such as the S&P 500 and the MSCI Emerging Markets Index. Sensex is a good proxy for the Indian economy and its integration with the world economy.

Expert Opinions on Sensex Investing

• Berger Paints CEO Abhijit Roy predicts almost double-digit growth in Q4 and sees no need to lower prices in the Indian market.
• Dinesh Kumar Khara, Chairman of the State Bank of India, anticipates 14-16% credit growth and NIM expansion in FY24 due to strong demand in the retail and corporate sectors, government infrastructure commitments, and interest rate stabilization.
• Mahesh Nandurkar is optimistic about industrials, real estate, and banks, showing signs of investment-driven growth.

Sensex covers most predictable sectors so that it will face upward growth. According to the most recent analysis, the Sensex today live to reach 1.72%, reaching 58,955.53. Investors can access the forum's technical analysis, candlestick patterns, news, and opinions. The market anticipates that the Fed will raise interest rates to 5% by May 2023. According to stock market experts, the worst of the bear market has passed, with stock valuations now lower and more reasonable than last year.

Factors to Consider Before Investing in Sensex

Before investing in Sensex, it is important to consider several factors. Here are some key factors that you should consider:

• Investment objective and risk profile: Sensex investing suits investors with a long-term horizon and moderate risk tolerance. Sensex can provide steady and consistent returns over time but also experience volatility and downturns due to various factors. You should invest in NSE Sensex only if it aligns with your financial goals and risk appetite.
• Diversification strategy: Sensex investing can provide exposure to the Indian economy and its integration with the global economy. It can also expose you to the risks and challenges of the Indian market. You should diversify your portfolio across different sectors, geographies and asset classes to reduce risk and enhance returns.
• Costs and fees: Sensex investing involves various costs and fees, such as brokerage charges, transaction charges, securities transaction tax (STT), stamp duty, GST and fund management fees. These costs and fees can eat into your returns and affect your net profit. Before investing in Sensex, you should compare the costs and fees of different brokers and fund houses.
• Fund selection: There are various funds to invest in NSE Sensex, like ETFs, Index funds. These funds offer low-cost, passive and diversified exposure to the Sensex without requiring you to research or buy individual stocks. However, these funds can also have different features, such as tracking error, dividend policy, taxation, liquidity and availability. You should choose the fund that best suits your needs and preferences.

How to Invest in Sensex

You have several ways to invest in Sensex. Here are some ways to invest in Sensex: 1. Directly investing in Sensex stocks - You can buy stocks of companies that are a part of Sensex. The BSE Sensex index comprises 30 stocks, and you can invest in these stocks through a stockbroker or an online trading platform. 2. Exchange-traded funds (ETFs) - You can invest in NSE Sensex through ETFs, which track the Sensex index's performance. ETFs can be bought and sold on stock exchanges, offering investors the benefit of diversification.

ETF	LTP	Volume	Value (in Rs. Lakhs)
ICICI Prudential S&P BSE Sensex ETF	642.30	7,171	4,571,512.50
HDFC SENSEX ETF	633.00	5,785	3,641,888.90
UTI S&P BSE Sensex ETF	615.88	451	277,283.82
LIC MF EXCHANGE TRADED FUND - SENSEX	628.41	61	38,368.39

3. Index funds - Similar to ETFs, index funds track the performance of the Sensex and can be bought and sold through mutual fund companies. 4. Mutual funds - Another way to invest in Sensex is through mutual funds, managed by professional fund managers who invest in a diversified portfolio of stocks.

Conclusion

In conclusion, investing in Sensex is a wise decision for those looking to diversify their portfolio and earn significant returns over the long term. With a track record of consistent growth and stability, Sensex has become a popular choice for novice and experienced investors. However, it is important to remember that investing always carries some risk. It is crucial to research and consults with a financial advisor before making any investment decisions. It's also important to keep in mind that the value of your investment can fluctuate over time, so it's important to have a long-term investment strategy in place. Overall, if you're willing to take the time to educate yourself and make informed decisions, investing in Sensex can be a great way to build wealth and achieve your financial goals. So, if you're ready to take the plunge, start planning your investment strategy with Samco today!