The Telegraph
Since 1st March, 1999
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Sensex makes nonsense of peaks

Mumbai/New Delhi: Five hundred points in just over a month, 2400 points in a year and 6500 points in 15 years ' that is the story of the sensex today.

The Bombay Stock Exchange sensitive index that tracks the mood of the market rappelled up to a new peak of 7500.

According to a PTI report, the sensex started its four-digit journey from 1007.97 exactly 15 years ago on July 25, 1990.

Today, the 30-share index closed at a record high of 7505.6 points, up 82.35 points (or 1.1 per cent) as new investors from Japan and South Korea funnelled cash into Indian stocks, buying into the country’s robust growth story.

The surge was underpinned by a report by the National Council of Applied Economic Research (NCAER) which said the business confidence level of Indian companies had vaulted to a 10-year peak at 143.1 in April. It’s a level that has not been seen since December 1995, when Manmohan Singh was finance minister.

In the reform lobby’s opinion, as Prime Minister his record is less impressive, as they believe his liberalising spirit is now in Left captivity, but the stock market does not seem to mind.

Nor the corporate sector, as the NCAER survey suggests, raising the intriguing possibility that it is perhaps best for the government not to do anything.

It did do something today, though. To free the public sector from political control, the cabinet allowed profitable companies to make acquisitions and enter into joint ventures without referring the investment to the government.

Stock market operators said the recent revaluation of the yuan against the dollar had sent foreign investors scurrying out of the Chinese market. The anticipation of a stronger rupee after the yuan’s revaluation prompted a number of them to shovel money into India.

The buzz on Dalal Street is that big-ticket investors from Japan like investment bank Nomura are about to place big bets on the Indian economy which has seen a steady 7 per cent growth in the past few years.

The NCAER, an independent think tank, said higher consumer demand and export orders could drive industrial growth.

The euphoria in the market was further bolstered by a Reserve Bank forecast on the eve of its credit policy announcement that the economy would grow at the rate of 6 to 7.2 per cent.

“India is going through a paradigm shift and that is being reflected in the stock market,” said Rakesh Jhunjhunwala, the country’s largest bulge-bracket individual investor.

“There isn’t one reason, but several,” he added. He felt the good earnings numbers of Indian companies and the transparent stock trading system were the biggest attractions for foreign investors.

“Huge FII inflows and the government’s promise to relax rules for doing business in the country in addition to grand projects like an Indo-Iran gas pipeline have helped boost the investment climate,” said S.P. Gupta, former member of the Planning Commission.

Gupta said the confidence levels were reflected even in the real estate and commodity markets. “Whenever the economy is on an upswing, these markets too normally rise... prices of real estate in all major metropolises have been pushed up by 10-20 per cent.”

The Cassandras have gone into the woodwork, but there are some voices of restraint.

“All the bets are off in the market. It can go anywhere from here,” predicts Shankar Sharma of First Global, a premier stock brokerage. “The market is in a very strong momentum zone and momentum continues till it does.”

Will the market cross 8000' That’s the question that hangs tantalisingly over the market. Last week, finance minister P. Chidambaram said he would be worried if it scaled that peak.

Chidambaram’s comment and his calls for circumspection don’t appear to have had any sobering effect.

But even the normally bullish Jhunjhunwala isn’t ready to take a bet on where the sensex will go by Diwali or the year-end. All he was ready to say was “the long-term trend is upwards”.

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