After a fast-paced 2006 and a comparatively sanguine 2007, the 30-share BSE Sensitive Index finally breached the 15,000-mark in afternoon trades on Friday. It took the Sensex seven months to climb 1,000 points to the 15k mark, while it only took 36 days to climb 1,000 points to 14k on December 5, 2006.
Early in the year, domestic and overseas analysts had virtually written off the domestic market. A level of 11,000 was seen as a fair representation of the earnings potential. So, many were taken by surprise. ?Robust corporate earnings were seen as the biggest driver,? says Sandeep Neema, fund manager with JM Mutual Fund. Last quarter earnings for around 2,400 companies have grown 25% over the same period in FY2006. For the top 500 companies, the number is around 30%.
Analysts admit that earnings growth was way beyond expectations. And this started to lift the gloom brought on by interest rate rises wrought by Reserve Bank of India. FIIs maintained a fickle stance; December and March saw them as net sellers in the marketplace. Mutual funds also returned to the market after sound results started pouring in and year-end redemption pressures were reduced. They were net sellers of equity for the first three months of the year. ?This movement in the Sensex has taken place against all odds, and this shows the robustness of the market,? says a fund manager with an overseas fund.
With the rupee appreciating at a clip unseen in the past nine years, IT stocks, which are major Sensex pivotals, also took a beating. The share of IT stocks in total market capitalisation has gone down from 13.46% in December to 11.89% now.
However, old economy stocks in the oil and gas sector quickly replaced them; banks also hogging the limelight. The latter seem to have become a darling of mutual funds who appear to to be lapping up most bank and financial stocks. ?Almost every fund offer picked up around Rs 1,500 crore from the marketplace,? says Neema. This, he says, suggests the level of retail and domestic participation in the marketplace. Though net buyers in the current year, the influence of FIIs has reduced, he adds.