Bulls continued their dream run on Dalal Street, sending stock indices to scale a new peak today. With foreign institutional investors (FIIs) pumping in dollars like never before, the benchmark Sensex ended at its all-time closing high of 6,328.43, up 100.60 points, or 1.62 per cent over its previous close. Creating yet another record, the Sensex also hit an all-time intra-day trading high of 6,335.14. From a recent low of 5,558.14 touched on October 26, the index has gained 770.29 points on sustained buying interest. The previous all-time peak for Sensex was 6,234 touched on November 30, 2004. Even the NSE S&P CNX Nifty index gained 36.95 points to end at its all-time closing high of 1,999. The mood in the market appeared extremely bullish on the back of foreign fund flows, which have touched the $7.3 billion-mark in 2004. This is a record annual inflow ever since FIIs were allowed to invest in Indian markets in 1992-93. Simultaneously, the rupee’s dream run against the US currency gathered further momentum as it spurted by a whopping 35 paise to hit an over 7-month closing high of 44.10/12 per dollar, thanks to heavy FII inflows amidst a tumbling dollar overseas. The growing FII interest comes on the back of a compelling growth story and the weakness in the dollar. “One of the primary reasons is the continuous slide in the value of US dollar and the rising US budget deficit. Foreign funds are investing in emerging markets. India is an obvious choice because the valuations are still reasonable,” said Andrew Holland, Executive Vice- President of DSP Merrill Lynch. Of the 11 sectoral indices, six — Bankex, Auto, Metals, Healthcare, Capital Goods and Oil & Gas — touched all-time high levels on Thursday. “Good investment scenario on the back of government policy on tax reforms, lack of lucrative investment instruments, strong fundamentals and corporate performance have seen sustained inflow of foreign money, which is driving the Indian markets,” said Rajesh Jain, CEO, Pranav Securities. The Sensex has gained 13.85 per cent since October 26. Market circles say stocks had gone up too high without an adequate correction. Of course, economic fundamentals are healthy and oil prices have fallen, but retail investors need to be cautious. “A correction at the current level will be healthy for our markets,” said Jain. The rally in a host of stocks like Wipro, TCS, Infosys, SBI, Bharti Tele-Ventures, ITC, Hindustan Lever, ICICI Bank, Sail, HDFC, Tisco, Gail India and Tata Motors has resulted in a substantial increase in market cap in the last one month. The surge in FII inflow has also strengthened the rupee against the US dollar, which is weakening against global currencies. FIIs used to bear losses on their portfolio investment when the rupee would continuously depreciate until two years ago. With the rupee strengthening, that’s not the case now. According to a brokerage head, who preferred anonymity, it’s festive time for most of the heavyweight fund managing houses — a period when they fill the stockings with bonuses and appreciation. The Indian market, if one goes by the market data of just last week, is performing better than all the other Asian markets. A section of the market thinks a downfall is in the offing in another two to three weeks, as FIIs start booking profits. The market then might collectively fall. But, a comparison with the carnage last December will prove that this year markets have performed better due to sectoral revivals, strong fundamentals and corporate performance.
