The stock markets generally have a large no of stocks listed which may be thousands but the major market cap may be in the top few hundred cos. Exchanges formulate indices to give a view of the overall market to give investors a fair idea. Also sectoral,market cap etc are things on basis of which further indices are formulated and there could be various possibilities. So at some point of time index moves may not clearly replicate the pulse of the markets and this is when comparison of the same makes it useful for analysis.
Also the market and technical consensus is the major indices may re-test lows or make new lows we need to look for opportunities.
Below as we notice the amount of drops or value erosion in the different indices. If we see FMCG and Pharma were the only indices saved but they never participated in the bull run heavily too.The small cap and mid cap index has been hammered badly so is Real estate ( but we dont have a long data for it ) .
BSE Auto Index - 64%
Bse Bankex --- 67 %
Bse Cap Goods --- 72%
Bse consumer durables --- 78%
Bse FMCG -- 40%
Bse Pharma -- 44 %
Bse IT --- 64%
Bse Metals - 82%
Bse Midcap -- 73%
Bse Oil and Gas -- 68%
Bse Small cap - 78 %
Bse 500-- 68 %
Bse Dollex 30 -- 71.52%
Bse Sensex -- 63.7 %
Some observations which may be of importance here :
Stock specific opportunities can be seen in following on a further decline below previous lows !!
--- > Bse Metals /Consumer durables Index has been the biggest loser but this was not the BULL sector like Real estate.
--- > Small cap and Mid cap index have lost around 73-78 % and will lose more if Sensex continues down and there could be tremendous opportunities here but options are also many !
Another important thing to note is DOLLEX which is Sensex in dollar terms has actually lost 71.5% which is more then the Sensex at 63.7%.
In the Depression of 1930s Dow Jones fell a whopping 90% from peak. So in that sense statistically if this is a better time many indices close to 80-90% dip may actually open up opportunities for investors.
This statistical study is purely academic but if one needs to profit immensely from it would need to do a detailed stock specific approach as the options are MANY ! and some may go down the drain too in a longer consolidation period.
All in all long term investors should now start researching again but action to take a position can always be delayed till one is comfortable or convinced 🙂