Stock Market and the Gamble,
Lottery, Strategic Venture Doctrine
Vanam Jwala Narasimha Rao
The Hans India (27-04-2025)
{Many investors hope to double their money overnight, picking stocks as though they were lucky numbers. Such an approach ignores risks and lacks any strategic foundation. Long-term success in the stock market depends on research, planning, and discipline}-Editor Synoptic Note
The Managing Director and CEO of Bombay Stock Exchange (BSE) Sundararaman Ramamurthy has urged investors to be vigilant and informed. His advice was, 'You trade what you understand, and you understand what you trade: If you don’t do that, you will have a problem.’
This is a momentous observation given the substantial number of people who trade in the stock market. In fact, many investors are found wanting when it comes to selecting the right companies, monitoring the market, and choosing between Lump Sum Investments and Systematic Investment Plans (SIPs). While the former comes with a greater level of risk but offer higher returns. The later promotes disciplined investing, a lower level of risk, and more consistent returns.
Consistency and informed decision-making matter more than market timing. Meanwhile, to guide the investors, and make available market trends, shape investor confidence, influence policy decisions, and act as economic barometers, stock indices like the Sensex have emerged. Irrespective of whether markets are ‘Bullish (Rising) or Bearish (Falling)’ the indices serve as reference points to compare the performance of individual portfolios or mutual funds, providing a macro-level snapshot of business sentiment and economic health. Sensex is a statistical measure reflecting composite value of selected group of stocks.
As a key ‘Benchmark of the Indian Stock Market’ the BSE Sensex, or Sensitivity Index, represents the weighted average performance of 30 financially sound and well-established companies from diverse sectors, including banking, technology, energy, and consumer goods. The Sensex tracks the performance of these companies, and the index is calculated using a scientifically designed market capitalization-weighted formula.
Charles Dow's creation of the Dow Jones Industrial Average (DJIA) in the USA in 1896, featuring 12 companies, marked the genesis of stock indices globally. Following suit, India launched Sensex in 1986. It was developed by the BSE’s Economic Research and Policy Division. Later, the National Stock Exchange (NSE) introduced the NIFTY 50, another major index tracking 50 large companies. As BSE MD and CEO Sundararaman Ramamurthy suggested, investors need to understand how these listed companies are performing within the broader market trend.
Reports like Sensex or Nifty have gone up or fell sharply, reflect the collective performance of the 30 or 50 companies respectively. Rising index signals economic optimism, job creation, and business growth. Falling index indicates caution, global pressures, or weak corporate earnings. Market movements are influenced by a wide range of domestic and international factors. Sensex and Nifty experienced dramatic highs and lows over the years.
Sensex was launched in 1986, with data back-calculated to 1979 base of 100, beginning around 550 points. Nifty followed in 1995 with a base of 1000. During the global financial crisis of 2008–2009, in a steep decline, Sensex dropped to 7,697 and Nifty to 2,524. Harshad Mehta Fraud resulted in Sensex low of 2,529.
Before the 2008 crash, Nifty peaked at 6,357 and Sensex touched an all-time high of 21,206 points in January, and later fell to a low of 8,160 by March 9, 2009. More recently, between September 2024 and February 2025, both experienced rises. On September 27, 2024, Sensex hit an all-time high of 85,978 and Nifty 26,277 points. By February 28, 2025, they dropped badly to 73,198 and 22,124 respectively, reflecting market trend consequent to global and domestic developments.
‘Defying Global Market Trend’ and marking seventh day of rise, Sensex and Nifty touched 80254 and 24328 points respectively by April 23, but ended lower next two days touching 79213 and 24039 points on April 25. Sensex rose by 660 and Nifty added 187 points during the week.
Despite unpredictability-inherent characteristic of markets, Sensex manipulation cannot be ruled out, though difficult. Market operators, influential investors may artificially inflate stock prices by buying in bulk before offloading for profits. Insider trading by people, use confidential information to gain unfair advantage in the stock market, despite SEBI Regulation. Through Pump-and-dump scheme, fraudsters create a buying frenzy that will Pump up the price of a stock and then dump shares of the stock by selling their shares at the inflated price.
The 2009 Satyam Computers (Part of both the Sensex and Nifty) scandal remains a striking examples of how a single company's collapse can impact the entire market. When Satyam Chairman, Ramalinga Raju, admitted that he manipulated company’s accounts, the stock plunged over 75% in a single day, eroding massive investor wealth. Sensex dropped by 750 points. The scandal raised concerns across corporate India, affecting the broader market. International markets too witnessed such corporate frauds causing collapses of high-profile firms like Enron (USA) and Wirecard (Germany). These cases reinforce the idea that investor’s trust is the foundation of capital markets, and once that trust is broken, consequences can ripple far beyond the company in question.
Despite being rooted in logic and data, the stock market from time to time depicts itself as a gamble, lottery, or rich man’s playground. Especially beginners, Doubting Thomases, and even seasoned investors occasionally feel this pinch. This perception is not entirely unfounded. When people without due diligence, invest blindly, based on ‘Media Hearsay’ their investment turns into speculation. Hence, stock market may resemble a casino more than a wealth-creation platform.
The comparison to a lottery may arise from unrealistic expectations. Many investors hope to double their money overnight, picking stocks as though they were lucky numbers. Such an approach ignores risks and lacks any strategic foundation. Luck may play a role in short-term gains. But long-term success in the stock market depends on research, planning, and discipline. It is similar to the difference between gambling on luck and managing a business wisely.
When treated responsibly, the stock market is far from a game of chance. It becomes a serious platform for long-term wealth creation, akin to managing a business. By following a disciplined strategy investors become entrepreneurs of own financial future. They need not be driven by emotion, tips, or momentary enthusiasm, and face losses, that reinforce the saying that ‘stock market is gambling’ myth. A sound investment strategy emphasizes reviewing portfolios regularly, avoiding emotional decisions, using tools for limiting losses by automatically selling investments, and focusing on capital preservation before chasing high returns. ‘Earning 10% this year means nothing if you lose 30% the next.’
Risk management, rather than profit maximization shall be the rule for investing. SIPs are ideal for those with consistent income and long-term horizons. They average out costs, reduce timing risks, and instill investment discipline. Lump Sum Investments, while potentially rewarding during market downturns, demand greater risk tolerance and market awareness. A hybrid approach, balancing both based on one’s financial goals and risk appetite, may yield best results.
Sensex mirrors India’s economic aspirations, market health, and investor confidence. Whether investor views the stock market as a gamble, lottery, or strategic venture into big business, it depends entirely on engaging with it. Emotional and uninformed decisions may make it feel like a game of chance. Thoughtful, consistent investing based on goals, research, and risk awareness, transforms it into a powerful vehicle for wealth creation.
It is not Timing the Market (trying to predict the best times to buy low and sell high), but Time in the Market (staying long term invested) that determines true success. Sensex is a strong indicator of India’s economic growth over time. Historically, it has shown consistent long-term growth despite short-term volatility. From 1000 points in 1990 Sensex crossed 40,000 by 2020, and has been soaring around or above 75,000 points in 2024 touching 85,978 points once.
Sensex and Nifty listed 55 (Plus 25 common) companies represent Financial Heartbeat of India and drive wealth creation. With gold prices crossing Rs One Lakh per 10 grams, the rupee weakening, and inflation rising, strategic market ventures become increasingly vibrant.
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