The BSE Sensex is one of the most widely tracked gauges of how the stockmarket is doing. A single look at the Sensex’s level is a popular way to know how stocks have been performing.

Off late though, the benchmark index has stuck stubbornly around the 17,000 level. It just refuses to make any big moves above that level. Thus making many an investor yearn for that magic ’21,000’ level that it had touched during the happy days of January 2008.

So what is it that’s holding the Sensex back? The following chart should make things a little clearer...

The chart stacks up the various companies that make up the BSE Sensex. It shows how the stocks of these 30 companies have performed since the index touched its intraday high of 21,207 on the 10th of January 2008. The red bars show those companies that are trading higher (at 18th Dec, 2009 closing prices) than what they were when the Sensex was at 21,000. Similarly, the blue bars show those companies which are trading lower than what they were at that time.

The most prominent thing about the chart is the fact that there only 10 companies that are trading higher than their January 2008 levels. The rest of the 20 companies are trading lower. Overlooking their individual weights in the index, the losers far outweigh the gainers by sheer numbers. Evidently, these are the culprits that are keeping the Sensex from once again occupying its throne of 21,000.

But to the keen observer, this exercise also brings to light another important aspect of the stockmarkets. That is: Even though the index is still about 20% lower than its high of 21,000, many individual stocks across different market caps have now reached levels far above their January 2008 levels when markets were considered to be ’expensive’.

Thus, though the Sensex level might appear to be much lower than its 21,000 highs, this does not automatically mean that all stocks in general are cheaper than that erstwhile high market. Or that all stocks will still go higher were the Sensex to move to 21,000 once again. Infact, many of them are now at their lifetime highs, and quite expensive too. Thus investors investing in the current market need to be acutely aware of the individual stocks they are buying. And more so of the valuations at which they are entering these companies, irrespective of what the broader markets might seem to convey.

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