Sensex: Going more global :: Business Line

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In the last ten years, the weight of commodity businesses in the Sensex has dropped from 28.6 per cent to 18.9 per cent. This has diminished the index's exposure to speculative price movements of commodities in the last few years.

Two big commodity sectors that lost their influence in the Sensex are oil and cement. In oil, the old index constituents — Hindustan Petroleum and Castrol India — are not a part of the index now. Reliance Industries and Reliance Petroleum put together had a weight of 18.9 per cent in 2002 but now RIL (RPL has merged with RIL) enjoys a weight of only 9.9 per cent.

The weight of non-commodity sectors in the Sensex has risen to 81 per cent from 71.4 per cent in the same period.

PLUS POINT

This is a plus for the index as it has meant fewer swings in the profits of Sensex companies or their stock prices. In the last five years, global commodity prices have gone from boom to bust and boom again.

Automobile, banking, power and information technology are sectors to have seen a substantial increase in influence in the Sensex over the years.

These sectors tend to deliver steadier profits than commodity companies.

While the commodity influences on the Sensex may be waning, is it less prone to global influences than in 2002? Not quite.

While the weight given to oil companies has declined, that given to metals (5.5 per cent versus 3.9 per cent) and information technology (18 per cent versus 13.9 per cent) sectors has increased. As all these sectors are impacted by global factors, the global influence has only risen.

In 2002, Sensex companies earned 11 per cent of their sales in foreign exchange. Now forex earnings bring in as much as 18 per cent of the total. That explains why the rupee has become such a big factor influencing the markets.