Be LONG on Sensex!

It is always a good strategy to be long on Sensex. This is for two reasons. One: BSE regularly makes changes to the Sensex constituents, usually, dropping the laggards and including the performers. Two: The value of index depends on individual stock free float market capital. In the last three years, stocks like DRL, MTNL, Hero Honda, HPCL, Tata Power & Zee Tele have been dropped to give way to DLF, M&M, Rel Com, TCS & NTPC. If the stock composition in Sensex is unchanged the returns would have been 9%. This indicates that the exchange is going portfolio management for us. Another good way to identify sectors is to see how their composition has changed. In last three years, Capgood stock's contribution increased by over 7% and that of Telecom & Bank by over 5%. Also, IT stocks have reduced their contribution by 7.6%, Pharma by 6% and FMCG by 5%. Realty has shown its presence through DLF's addition in Nov 2007. Its contribution now is 1.8%. Another point to note is Media, one of the fastest growing sectors now, has no representation with Zee Tele out of Sensex. It is just about time for some big media boy to get in. This indicates the sectors one should be long & short on.
Concept: Haresh Soneji, my colleague at CNBC-TV18