On January 2, 1991, the Sensex was trading at a mere 999 points. Five years later, on January 1, 1996 the same Sensex was trading at 3,128 points, a gain of 213 per cent in jus five years. Don't rejoice yet for the bad news followed in the next five years. This period was marked by one of the many turbulent periods in the history of the Indian stock markets as the Harshad Mehta scam broke out on April 23, 1992 and ordinary investors bore the brunt of it. Millions of rupees of investors' money were wiped out in the selling frenzy that ensued.
On April 28, when the markets opened for trading, the BSE Sensex closed at 3,896 points, a precipitous fall of 12.78 per cent, between two trading sessions.
Five years later as on January 1, 2001, the BSE Sensex was still in the sub 4K range at 3,955. It gave a piffling return of 26 per cent from 1996 to 2001 if you were to compare it with the period from 1991 to 1996!
Then the trend reversed and In the next five-year period the Sensex touched a high of 9,390 points on January 1, 2006 making investors rich by the bucketful and a 'bull market' a part of every Tom , Dick and Harry's stock market lexicon. Remember this period was marked by the dot com bust, Ketan Mehta scam and the aftershocks of 9/11 bombings that spooked the stock markets across the globe.
While it's not yet the end of the next five year period (from 2006-2011), a look at how the stock markets behave in the short term is quite stark and should clearly discourage investors from investing for the short term. In the two-year period since January 1, 2006 to January 1, 2008 the stock market reached dizzying heights only to crash land again in the six months to July 15, 2008.
From 9,390 on January 1, 2006 the BSE Sensex rocketed to 20,300 points in just about 24 months. In percentage terms, this comes to about 116 per cent, just about half of the percentage returns gained during the mind boggling period from 1991 to 1996. However, in the six months following January 2008, most of those gains have been erased.
At 12,676 points as on close on July 15, 2008, the BSE Sensex has made investors poorer by 37 per cent. This is the two-year period when the sub prime skeletons tumbled out of the banks' and financial institutions' balance sheets into the global stock markets and into our lives and mounting losses.
Also read: 'I have always benefited from balance transfers'
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