Yes of'course. It reflects the mood and future outlook of the investor community.
Essentially the stock indices are related with the economic growth of a country. To put it better, SENSEX would be a leading indicator for Indian economy.
The most common indicator for an economy is GDP. However other economic indicators are 'slow' in nature like CPI, prime rate, unemployment, etc which get manifested later hence they are called lagging indicators. On the other hand Sensex would have faster response time and investors take 'cue' from aspects like funding, corporate restructuring, bonus, buybacks, etc, while the result of these will happen later in the company which will result in growth much later. On a national level, FDI is also an important input to the system which will lead to growth of companies hence the economy, however first the sensex will jump on news of FDI norm changes while economic growth will lag behind and get affected later.
Also Ahmed as you rightly sad, it should be taken as one of the Indicators.