The BSE Sensex first crossed 20,000 in October 2007 and then several times thereafter. In the past, whenever it crossed 20,000, it couldn’t sustain the trend. Will Sensex be lucky this time? We describe what happened on each occasion the Sensex crossed 20,000

The Bombay Stock Exchange (BSE) Sensex index crossed 20,000, for the first time in more than two years. While bullish investors are excited, the Sensex has found to hard to sustain the 20,000 level earlier.
 

The first time Sensex crossed 20,000 was on 29 October 2007. This was the first major milestone for Indian markets and even prompted nationwide celebrations. The CNBC staff decked themselves with hats and decorated the office with banners, with Udayan Mukherjee hugging his computer to mark the occasion. However, the euphoria didn’t last long. It was an intermittent and choppy trend, and went above and below 20,000 only a handful of times and this sideways movement lasted a few days before trending downwards.
 

On 26 December 2007, two months later, it crossed the milestone again, and hit a life-time high of 21,206 on 10 January 2008. This sparked off belief that Dalal Street will sustain the trend this time. Again, it wasn’t meant to be. Though this trend was longer than the first one, it lasted just a few weeks. The Sensex started trending downwards and on 16 January 2008, it crossed below 20,000. Indeed, in the next few days, the market simply crashed like a pack of cards and on January 22^nd even hit the lower circuit at 15,332. A global financial crash ensued and by October 2008, Sensex was down to 7,697 on an intraday basis. It would be a long time before it would hit 20,000 again.
 

In fact, the Sensex wouldn’t hit 20,000 until nearly two years later, on 21 September 2010 when it crossed the threshold and mostly trended above psychological level for the next two and half months, supported by money gushing in from the foreign investors. Also, unlike the first two trends, this one held on longer—nearly three months—and resuscitated hopes that this could be third time lucky for the Sensex. However, once again, the trend wouldn’t sustain. After just five trading days of hitting the intermediary high of 21,109, the benchmark dipped below the milestone on 16 November 2010. Then the movement was intermittent and soon fell off after 7 January 2011. Soon, Sensex was pushed down by the headwinds of poor economic growth rising interest rates and Euro crisis. It has taken more than two years to cross 20,000 until today.
 

Today, the Sensex crossed 20,000 again but it has closed at 19,986.82. Clearly, there are sellers at every rally even though it would seem that investors are pouring money onto emerging markets. One difference between this time and the earlier occasions is valuation. The Sensex was valued at 26 times its forward PE in January 2008, at 19 times its forward PE in 2010 and only 16 times now. On the other hand, the market is factoring in a lot of positives such as a rate cut in January by the Reserve Bank, higher economic growth, a growth-oriented budget and strong earnings growth in 2014. If all these fall in place Sensex will sustain 20,000 this time but it’s a big if.