The Indian stock market has never seen so much interest in the recent past. The bulls are charged up and the market scaling new peaks is almost a daily routine now.
When everyone thought that the BSE Sensex was headed down at 7656 on 28th October 2005, it reversed violently and still continues in an uptrend ….. 8000 ….. 9000…. 10000…and still climbing!!
Right now the market is at a very crucial juncture and the movement of the Sensex is perplexing most investors. The Bombay Stock Exchange's 30-share benchmark index has moved up from 6000 levels on November 17, 2004 and crossed the 10000 mark, a rise of around 66% in less than two years. This is probably the highest return that any asset can give in India, be it government bonds, gold or for that matter real estate.
Rarely has the Indian stock market seen such dramatic yo-yoing. Is this irrational exuberance, or a sign of sustainable buoyancy? The answers lie outside the country, because it is the foreign institutional investors who continue to determine the market’s swings. Little has changed within India recently to warrant the Sensex doing this dance. If anything, corporate results have lost some of their zing, so there should be less buoyancy in the system. What has changed is the external situation. Oil prices have fallen as winter demand seems to have been accounted for. The US Federal Reserve has also indicated that it may cease raising interest rates in the near future. All these factors have managed to renew investor confidence in equities across the globe.
Mr Chidambaram said only a few months ago that he saw the Sensex reaching 8,000 as a worry trigger . When what was a remote prospect started beginning to look like a possibility, he fortunately modified his position. And now, even at 10000, the market does not seem crazily out of line. But the truth is that this gravy train will run as long as FIIs