Global financial crisis: Five years, almost to the day, after Lehman Brothers filed for bankruptcy, a majority of the 10 BSE Sensex stocks that were hit the worst in the aftermath of the financial crisis in the US have bounced back sharply and are now trading at significant premiums with Sesa Goa and Jindal Steel shares top movers and shakers.
On September 15, 2008, as the news of Lehman fall came, the BSE Sensex fell by 3.4 per cent and the same day the Dow Jones Industrial Average in the US fell by 4.4 per cent.
As the fallout of the crisis panned out over the two days on September 15 and 16, 2008, when the enormity of the crisis slowly dawned on the Indian bourses, at least 10 Sensex companies fell by 5 per cent or more.
Metals and mining majors — Sesa Goa and Jindal Steel — that fell by 12.4 and 11.1 per cent, respectively, topped the list.
ICICI Bank, which had its American Depositary Receipts (ADRs) listed in the US, saw its shares fall 9.5 per cent, while TCS and Tata Steel, which depend on the developed economies for much of their revenues, too fell sharply by 7.2 and 6.9 per cent, respectively.
However, over the last five years, much of that has reversed and the Sensex itself is up by 46 per cent during that period and is trading at significantly higher levels.
The fact that the Sensex is currently trading at a price to earnings (PE) multiple of 17.2, which is lower than the PE of 18.2 that it was trading on September 16, 2008. This signifies that the market is not giving much premium as the outlook for earnings remains weak at this point in time.
A number of companies have generated extraordinary returns for their investors. If TCS is up by 407 per cent over the last five years, Dr Reddy’s Labs has generated a return of 314 per cent in the same period. Wipro and Infosys have risen by 115 and 91 per cent respectively. Tata Motors has been another major gainer over the last five years. While its shares fell by 3.3 per cent in the two day period of Lehman fall, its shares are up by 335 per cent since then.
But this does not hold true for several companies especially those in the metals and mining industry and in the