Mumbai, Oct. 15: With five peaks already conquered this year, the question that’s bothering investors is whether the Indian stock markets will suddenly develop a feeling of vertigo after the heady climb.
Opinion is mixed, but most experts are optimistic that before Diwali — the festival of lights — one more milestone or Point 20000 could be scaled.
The optimism arises because of a strong flow of overseas capital into the markets and the confidence that corporate India will continue to post robust growth in the second quarter.
The earnings season has just begun and, despite challenging circumstances, Infosys Technologies Ltd churned out a decent performance while Tata Consultancy Services was ahead of estimates. Elsewhere, HDFC Bank posted strong numbers.
Then there is the expectation that as the economy has started showing signs of cooling down and interest rates having peaked, the Reserve Bank of India will not choose to raise key policy rates and that interest rates could even start heading southwards by the beginning of next year.
An additional bonus is that the spooky thought of an early election has almost vanished.
But there are others who are advising caution given the 22 per cent jump in the sensex since the US interest rates were reduced on September 18.
Experts here warn that volatility could be observed in the short run and investors should be prepared for a 500-point fall during a single session.
Apart from foreign institutional investors maintaining their strong purchases, it was the political statements that came from the capital on Friday that contributed to the sensex breaching the psychologically important 19000 today.
The BSE barometer galloped to a new trading peak of 19095.75 before ending at an all-time high of 19,058.67, a net rise of 3.47 per cent over Friday’s close.
“The comment from the UPA chairperson and the Prime Minister quelled fears of another political crisis and an early election. This was a sentiment booster today,” a broker said.
“The uptrend has been aided by the fact that political uncertainties have been pushed aside, interest rates have shown signs of heading lower, the finance minister has indicated that the appreciation of the rupee needs to be arrested as it is beyond the government’s comfort zone; and global liquidity has increased,” said Dinesh Thakkar, chairman and managing director of Angel Broking.
Although no one wants to predict where the sensex will head, Dhiraj Sachdev, vice-president at HSBC Asset Management, said local money could add fuel to the fire in the days ahead.
Besides heavyweights such as Reliance Industries and the Oil and Natural Gas Corporation, metal stocks such as Tata Steel and SAIL made a strong rally today.
Bank stocks were also active due to expectations that many will be able to repeat the performance of HDFC Bank. The BSE Bankex zoomed by 396.02 points or 4.25 per cent.
Crude prices in London zoomed to an all-time high of above $85 a barrel on Monday, propelled by robust demand from booming commodity markets and fresh geopolitical worries.
Oil has remained above $80 for most of the past month, fuelled by supply concerns ahead of winter when demand peaks and record lows for the dollar.