Recently, BJP through its twitter handle has claimed that Sensex and Nifty had their biggest single day gains on 20 September 2019. Here is a fact check of the claim.

The official Twitter handle of Bharatiya Janata Party (BJP) on 20th September 2019, tweeted about the biggest single day gains for Sensex and Nifty in the last 10 years. Further, the tweet also makes a statement that the corporate tax rate cut is the ‘Biggest ever economic reform since 1991’.  Here is a fact check about these claims.

Biggest single day gains in Sensex and Nifty_Claim

Claim: Biggest single day gains for Sensex and Nifty.

Fact: Sensex and Nifty are the indices for Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) respectively. On 20 September 2019, BSE Sensex increased by 1921.15 points over the previous day’s closing. This is the highest gain for BSE Sensex in a single day over the last 10 years. Similarly, NSE Nifty gained 569.4 points which is also the highest single day claimed over a decade. Hence the claim made regarding the biggest single day gains for Sensex and Nifty is True.
 
Claim: Biggest ever Economic reform since 1991.
 
Fact: Another statement in the tweet was that it is the ‘Biggest ever economic reform since 1991’. The tweet does not cite the specific reform being referred to. However, it is most likely that the tweet is referring to the corporate tax rate cuts.  Assuming that is the reform being referred to, ‘biggest ever’ is an exaggeration and does not present the true impact of any reform as both the BSE Sensex and NSE Nifty also saw losses after 20 September gains. Hence this claim is Misleading.

Sensex and Nifty are the benchmark
Indices of stock markets in India

Bombay Stock Exchange (BSE) and National Stock Exchange (NSE) are the largest stock exchanges in India for
trading of company stocks. With both of these exchanges having a market
capitalization of more than Rs. 2 trillion each, they broadly represent the
market sentiment.  

BSE Sensex, also referred to as
S&P’s BSE Sensex Index, comprises of 30 of the largest and
most actively traded stocks on BSE.

Biggest single day gains in Sensex and Nifty_BSE

Similarly, Nifty i.e. Nifty 50 (National Stock Exchange
Fifty)

consists of 50 of the actively traded stocks on NSE and are spread across 12
sectors.

Biggest single day gains in Sensex and Nifty_NIFTY

There are multiple factors which
influence the performance of these indices. The positive sentiment in the
investors based on the performance of the respective companies/sectors and the
initiatives of the government to create a positive environment for businesses
to thrive are some of the factors that generally help in the increase of value
of the stocks and there by these indices. 
On the contrary, negative sentiment and environment would result in the
stocks losing their value and hence indices losing.

Biggest single day gains over a decade for both Sensex and Nifty on 20 September 2019

The gains recorded by both Sensex
and Nifty on 20 September 2019 were the highest single day gains for over a
decade.

On 19 September 2019, BSE Sensex closed at 36093.47 points and on 20 September, it closed at 38014.62 points i.e. a gain of 1921.15 points. Prior to that, the highest one-day gain in the previous decade was 1421.9 points on 20 May 2019.

Biggest single day gains in Sensex and Nifty_BSE single day gains last decade

On the other hand, NSE Nifty closed at 10704.8 points on 19 September 2019 and gained 569.4 points on 20 September 2019 to close at 11274.2, the highest single day gain in the last decade. The highest single day gain for Nifty earlier was on 20 May 2019 (similar to Sensex) with 421.1 points.

Biggest single day gains in Sensex and Nifty_Nifty single day gains last decade

Even in terms of percentage gain compared to the previous day, the gain made on 20 September 2019, which is 5.32% was the highest for BSE Sensex in the last decade. The earlier highest percentage gain for BSE Sensex in a day was on 10 September 2013 when the Sensex gained 3.77%.

Biggest single day gains in Sensex and Nifty_BSE percentage single day gains last decade

Even for Nifty, the highest percentage change in a single day was recorded on 20 September 2019 with an increase of 5.32%. The earlier highest percentage gain over the previous day was 3.81% on 10 September 2013.

Biggest single day gains in Sensex and Nifty_Nifty percentage single day gains last decade

Decline in both Sensex and Nifty
post 20 September 2019

The big gains made on 20 September 2019 didn’t sustain for a longer period of time as both Sensex and Nifty fell over the next ten days.  BSE Sensex recorded a gain of 1075.42 on next working day of BSE, i.e. 23 September 2019, but 4 of the next 6 days recorded loss in the index, as noted in the chart below.

Biggest single day gains in Sensex and Nifty_BSE single day gain loss post Sept 20th 2019

Similarly, NSE Nifty also recorded gains on the subsequent working day with 326 points but recorded losses for 5 days in the next week barring 26th September.

Biggest single day gains in Sensex and Nifty_Nifty single day gain loss post Sept 20th 2019

Hence, it is true that the gains made on 20 September 2019 were the biggest ever in the last decade.

The positive sentiment of policy
changes did not sustain for a longer period

The tweet on BJP’s official Twitter account on 20 September 2019 also claimed that it is the ‘Biggest ever economic reform since 1991’. The tweet does not cite the specific reform being referred to. However, it is most likely that the tweet is referring to the corporate tax rate cuts announced on 20 September, 2019.

The stated intent of the government
behind this announcement include

  • Promotion growth and investment
  • Attract fresh investment in manufacturing
  • Stabilise flow of funds in Capital Market
  • Provide relief to listed companies

The idea behind this announcement was to create a positive environment for business. The announcement had helped in creating an initial positive sentiment in the market which reflected in the gains over the next two days. However, the performance of the stock markets since then indicates that the relief provided does not completely address the issues currently impacting the markets and thereby the economy. The stocks markets continue to trade in the loss.  Further, the magnitude of the single-day gains could also be attributed to the lower Sensex & Nifty numbers over the past few months.

Biggest single day gains in Sensex and Nifty_BSE graph overall losses last 4 months
Biggest single day gains in Sensex and Nifty_Nifty graph overall losses last 4 months

As the period graphs above suggest, both Sensex and Nifty closed higher in earlier months. Since the rally on 20 September was a short-lived one, it could take much longer for the indices to reach their highest ever closure. Hence the claim that the corporate tax rate cuts are the biggest economic reforms since 1991, is far-fetched and misleading.

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