Sensex Breaches 13K

Mumbai, Oct 30 | Updated: Oct 31 2006, 06:05am hrs
The markets always love a touch of drama. And so, as if orchestrated, the 30-share benchmark Sensex of the Bombay Stock Exchange (BSE) hit the much-anticipated 13,000-mark almost exactly at noon on Monday.

This milestone was the fourth 1,000-figure mark the Sensex crossed in 2006, a year which saw the index moving rapidly from 10,000 points on February 7 to the current levels.

The 13,000-point-mark had proved somewhat elusive as the Sensex came within striking distance of the psychological barrier on two previous occasions, but had failed to breach it.

On Monday, the index not only crossed it during intra-day trades, but also managed to stay above the magic figure as trading came to an end. Investor wealth soared a staggering Rs 33,26,147 crore on the BSE. The broader S&P CNX Nifty of the National Stock Exchange (NSE) closed at 3,769.10, up 29.75 points, which is also an all-time high for the index.

For the record, the Sensex gained 117.45 points on Monday to close at 13,024.26. At current levels, the index is trading at a PE multiple of 21.48, which is only marginally lower than that of May 11, when it was trading at a multiple of 21.84. At that time, it was said that many foreign funds would move away from India due to the high PE.

In calendar year 2006, the Sensex has been witness to several milestones, including the breaching of four psychological barriers, namely, 10k, 11k, 12k and now 13k. Never before in the history of the Indian markets have so many milestones been crossed in the same calendar year.

Market experts were of the opinion that the recent achievement had only proved that Indian corporates had come of age and were now setting global standards. This, they said, would only make things better for the Indian bourses.

S Mukherjee, MD & CEO, ICICI Securities, was of the view that the level of competitiveness of Indian companies had gone up and that they were growing not only at home, but also abroad. Earlier, one saw IT companies leading the growth chart. Things have changed now and the recent rally has been on the back of strong performance from sectors across the board. Not to forget that the FIIs have also been a major factor in the recent rally, he added.

Indeed, in the rally between 12k and 13k, FIIs have been net buyers at nearly Rs 14,000 crore. Interestingly, in the 11k to 12k rally, FIIs were net sellers at Rs 278 crore.

Mutual funds, too, have been slowly increasing contribution to the 1,000-point Sensex rallies. When the Sensex moved from 12k to 13k, MFs were net buyers at Rs 8,307.53 crore. This was significantly higher than the Rs 2,784.24 crore that MFs pumped in when the index gained 1,000 points to touch 12k.

I see the index at 14,000 by March

The Sensex has rallied to the historic mark of 13,000 points on the back of strong corporate earnings, liquidity flows and positive signals from the government. Based on these three factors, I see the Sensex at the level of 14,000 by March 2007.

The journey to the next milestone may see the index ranging between 12,000 and 14,000 points. The Sensex is an index of very strong companies. All are big and, therefore, it is very difficult to manipulate them. What-ever we have seen in these companies is genuine buying.

Once the valuation for the frontline companies goes up, people will watch the movement of mid-caps and small-caps carefully. The liquidity flows to these sets of companies will depend on the demand and supply scenario.

The positive trigger for the Indian market is that a lot of buying interest is being witnessed from abroad, and is based on good earnings from Indian corporates. All the positive statements from the political front, including the one from the PM on growth, have acted as enablers. The PM and Planning Commission deputy chairman Montek Singh Ahluwalias statement that India will spend $350 billion on infrastructure in the 11th Five-Year Plan has boosted sentiments.

The positive impact of the secondary market bull phase is already visible. Companies with big expansion plans are moving to tap the capital market. We expect to see more such large companies entering the market before the financial year comes to an end.

(As told to Yagnesh Kansara)