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ARE STOCK MARKET RETURNS REAL ? ... cracking the code




According to stock market experts, the Indian stock market is rising for various reasons but positive global sentiments are the prominent one. Apart from this, the strong Indian economy, liquidity buzz after better-than-expected inflation data in India, strong US CPI data, etc The inflation over 20 years would make an investment of Rs 2000 in the year 2000 equal to Rs 8269 in 2022; an equivalent investment of Rs 2000 in the stock market would be close to Rs 24461 in 2022. So, the question is really whether the stock market is really the place to go for investors? Hardly so. Why ? Ok, let us take the example of IIT for instance. Each student has scored top percentile scores in their careers prior to IIT. All of them (let us keep affirmative actions viz. reservation for backward and weaker sections out for the moment) would confirm to the description of top-notch if not brilliant students.

Now, the BSE Index includes the IT majors, Infosys, TCS, Wipro, HCL Tech Mahindra; the 5 banks HDFC, ICICI, SBI, Kotak & Indus Ind; vehicle majors M&M, Tata Motors, Maruti Suzuki, favorites like Asian Paints, HUL, L&T, Reliance, Nestle, Tata Steel and of course, the relative new comers like JSW, Sun Pharma etc. Like the example of the students admitted to IIT, all the BSE 30 Index are the top performers of the stock market. Hypothetically, therefore, if these students qualified from IIT and went on towards their careers, it is a safe bet that they would do very well in their earnings, over their peers from other private colleges. No surprise, therefore, if these select 30 stocks show a performance 200% more than normal increase based on inflation (As mentioned above the index in 2022 is 24461 whereas the inflation based index would be 8269). And don't forget that BSE enables trading in over 5000+ companies.


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