The Market Conundrum

After a gap of nearly six months, BSE Sensex is again trading at its lifetime high. The index is currently trading at 36,532, up by 0.73 per cent from its previous close. After touching a low of 32,596 in the month of March, it has bounced back to its previous high gaining 12 per cent during the same period.

On the surface, it seems that the market is back to normal, however, if we scratch the surface a little bit we will find great anomalies in the market. The Sensex, though, at lifetime high, the constituent companies of Sensex are trading far from their 52-week highs or the levels they touched in January 2018, when the market last touched its lifetime high. Most of the companies are trading lower than their January level. For example, Vedanta and Tata Motors have fallen by more than 33 per cent since January end.

Despite this, Sensex is trading high because only a handful of companies help the index gain significantly. For example, companies like TCS and Kotak Mahindra Bank are up by almost 25 per cent since the end of January.

Within Sensex, there are 20 companies that are trading below the price they were trading on January 29 and only 10 companies are trading above that. This means that for every one company with an upward trend, there are two companies whose prices are down. The situation gets worse if we take the entire market. For every advance, there are 4.6 companies whose prices have declined. The worst is ‘T’ group where for every one advance, there are 5.4 declines.