R Rajagopal,VP, IDBI Capital said: The increase in M-Cap of the Indian stock market reflects the broader improvement in the GDP growth rate projected in the next five years at around 8% from the past few years' growth rate of around 6 to 6.5%. The growth of 8% in GDP is the main reason for more FIIs being attracted towards India in a big way in calendar 2005. This robustness in the economy seems to be continuing when viewed amid the growth in credit offtake .
Ved Prakash Chaturvedi, MD, Tata Asset Management said : Though valuations are stretched, the index touching 11,000 is a natural progression of the faith that overseas investors are showing in the potential of the Indian economy. While short term risks in the market have gone up, clearly the longer term potential of the Indian economy is what is in the focus of these overseas investors.
A sectoral analysis shows that while oil & gas, banks, pharmaceuticals, textiles and shipping have shown marginal growth, the contribution of sectors like media, electronics, construction, cement & products, FMCG, energy, automobiles and diversified have been far higher in boosting overall market value. In contrast, aluminum & products, gems & jewellery, fertilizers and tyres saw an erosion in market cap, compared to February 6, 2006.