The Bombay Sensex 30 Plunges Into The Red

The Bombay Sensex 30 has been one of the poorer performing indexes of 2015, with year-to-date returns in the region of -4.75%. The index is currently trading at 26,192.98, and the 52-week range is 24,833.54 on the low-end and 30,024.74 on the high end. It is interesting to note that the 1-year return is also negative at -1.98%. This cap-weighted index selects index members based on multiple factors including the following: floating-stock adjustment depth, liquidity, depth, and representation in the industry. The index had a base year of 100 in 1978/1979 and the free float methodology was adopted in 2003.

Sensex 30, 1-year Performance

The best performing companies comprising the Bombay 30 include the following: Axis Bank Ltd which is a private banking institution, Maruti Suzuki an automobiles/passenger cars manufacturer, HDFC Bank a private banking institution, Infosys an IT software enterprise, Sun Pharma a pharmaceuticals and drug manufacturing company, Lupin a pharmaceuticals and drug company, and Dr Reddy's labs a pharmaceutical and drug manufacturing company. It is clear that the most successful companies which make up the Bombay Sensex 30 are largely in the pharmaceuticals and drug manufacturing sector. This has been one of India's strengths for decades, as low-costs and lack of stringent regulations allows for the mass production of pharmaceutical products for worldwide distribution.

Strong Performers in Bombay Sensex 30

The aforementioned companies have proven themselves in terms of their performance over the past 365 days. Many companies in the Bombay Sensex 30 have racked up negative performance over the past 1 year. However the following are the most successful Bombay Sensex 30 companies over the past 365 days (in terms of improved performance in percentage terms):

·         Maruti Suzuki 1-year change of +47.48%

·         Lupin 1-year change of +36.58%

·         Axis Bank 1-year change of +30.27%

·         Dr Reddy's Labs 1-year change of +24.14%

·         HDFC Bank 1-year change of +22.85%

·         Infosys 1-year change of +19.42%

·         HDFC 1-year change of +14.52%

·         Sun Pharmaceuticals 1-year change of +11.74%

The index is being dragged down by negative performances from the following constituents:

·         Sesa Goa 1-year change of -65.41%

·         Tata Steel 1-year change of -55.23%

·         Hindalco Industries 1-year change of -52.16%

·         ONGC 1-year change of -42.36%

·         Tata Motors 1-year change of -36.91%

·         GAIL 1-year change of -35.70%

·         Hero MotoCorp 1-year change of -19.12%

Commodities Companies Suffer in India

It is also interesting to point out that the biggest losers in India’s Bombay 30 include the steel manufacturing companies. This is directly due to the government's policy of preventing mining in certain sectors. India has moved away from being a net exporter of steel to being a net importer of iron ore used in the manufacture of steel. Traders will do well to place put options on the major commodity-producing companies on the Bombay Sensex 30, at least into the foreseeable future. Call options on India's pharmaceutical companies are relatively safe bets vis-a-vis the Bombay 30 index. 

The index has been performing poorly as a result of weak global performance. This is largely the result of international trends. In particular, market weakness in China and Japan is driving investor sentiment. Concerns about the Fed interest-rate hike was also weighing on the Bombay 30, and despite the fact that a September rate hike was not implemented, there is a real possibility that rates will increase before the end of 2015. This will lead to capital flight from emerging market economies like India. The oil and gas index of the BSE has come under increasing pressure in recent weeks, while the automobile index and the capital goods index have shown some steel.