Sensex superstar

For India, home to Asia’s oldest stock market, 2004 has been a year of records. And the New Year began with a bang with the benchmark Bombay index closing at a new high. The index on Monday rose 76.51 points, or 1.16 per cent, to close at 6,679.20, compared with the earlier record of 6,602.69 on December 31. Last year saw the index breaking the 6,000 barrier for the first time and also its largest intra-day fall, of 800 points, on Black Monday after the ruling party lost the elections. Since Black Monday the index has gained 50 per cent and 5 per cent in December alone. But even at these levels, most analysts feel the market is not overvalued.
The same year overseas funds invested a record $8.51 billion in Indian stocks, compared with $6.59 billion the previous year. The foreign funds have pushed the index 763.73 points or 13.1 per cent in 2004. The growing attractiveness of India vis-a-vis other emerging markets has seen the foreign funds riding on the booming economy and focusing on the growing attractiveness of the country as an investment destination. Experts are of the opinion the market could move up by 15-20 per cent from current levels -- at around 7,500-8,000 points within the next 12 months if the corporate sector can sustain the present growth rate, barring any unforeseen circumstances such as a sharp spike in crude prices and a bad monsoon. A poll of CEOs has suggested that over 27 per cent expected profit growth between 10 and 20 per cent, 17.24 per cent expect it to be between 30 and 40 per cent, and 13.8 per cent expected it to be between 40 and 50 per cent during this financial year. And if this trend is to continue foreign funds will continue to ratchet up the market for some more time and India is where the action is going to be for some time.
It is quite probable that 10 years from now people will all be reading about Indian corporates that grew big and prosperous in front of their eyes, like the Korean chaebols Of course sceptics, which India has one too many, who make a living from running down the capital markets as temples of greed and gambling, will continue to point to the laws of physics -- what ever goes up must come down. Maybe this time they are missing the picture. When the Dow Jones index crossed 500 in April 1956, it was at a 10-year high, having dizzily risen from the 50 levels of 1930s. Less than 50 years later that same index crossed 10,000. No investor could have foreseen that in 1956.
This is an editorial published in Oman Tribune