When you invest in a business you try to analyze different facets of the business. One way of investing in business in an indirect way is investing money to subscribe for blue chip scrip in the secondary market. And for that you might be profoundly depending upon the towering sensex. But be wary........ There are reasons for saying this
1) As it considers only 30 stocks from 13 sectors; the overall picture is not captured.
2) The companies keep changing, so comparison hitch is there.
3) Unorganized sector accounts for 90% of employment. But sensex does not take into account this sector.
4) The growth of sensex does not reflect the average growth rate of GDP or GNP or National Income.
5) If even some sub-indices (Bankex, IT index, FMCG index, Oil & Gas index) are moving southward some sub index may become so powerfully northward moving, that the overall picture seems to be satisfactory.
6) It does not consider the inflation rate, unemployment rate which are the indicative of the overall economic flamboyance or gloominess.
Suggestions are always welcome.