Sensex rally longest in four years

Thank God for another ‘Good’ Friday, the Street heaved collectively as it ended its thirteenth straight week of gains. The Sensex gained 95 points on Friday, taking the week’s tally to 478 points or 3.3%. 
Since the upturn started in the first week of March, the index has gained at least 2% every week, save for one. The only blip was in the last week of April, when the gain was 0.65%.

On the other hand, the index also recorded one of the largest single week gains of 14% in the week following the surprise election results, a fortnight ago.

Though the rally has seen stock prices virtually double, with the index itself gaining 81.4%, or 6777.73 points, it is not the longest ever.

Four years ago, at the beginning of the last bull market, the Sensex recorded week-on-week gains for 16 straight weeks. But the gains were more modest. Between the last week of April, 2005 and the last week of August, 2005, the Sensex rallied from 6154.44 to 7680.22, recording a gain of 26.4%.

In the current rally, the BSE Realty index was the best performing one in the last 13 weeks, nearly trebling in value. The Metal index also notched up gains, surging 158.5%. Capital Goods, the Bankex and the Consumer Durables Index, have all gained over 100%. The mid-cap and small-cap indices also outperformed the Sensex, going up 109.2% and 121.8%, respectively.

Twelve of the 30 Sensex companies have doubled in the time. Jaiprakash Associates topped the list of gainers on the Sensex, soaring 232.6%. Tata Steel went up 195.8%. Tata Motors and DLF rose 181%.

Foreign institutional investors (FIIs) have been large buyers, pumping in Rs 31,629.10 crore into the Indian equity markets. Domestic institutions have been less involved, contributing only Rs 3,572.20 crore, or just over a tenth of the FII flows.

It is this flow, which is likely to determine how long the markets can keep going, say experts. There might be some signs of fatigue setting in, too.

“It looks increasingly difficult from here, although mutual funds and some of the FIIs, of the long-only kind, might still be sitting on cash,” said Ajay Parmar head of research at Emkay Global Financial Services.

“Valuations are not justified at current levels, but the flow of liquidity will determine how the markets will act.”

“Profit booking is the only reason for a correction as fundamentals are unlikely to change. It is possible that after such a run-up, one might see some money being taken off the table,” he added.

Ambareesh Baliga, vice-president, Karvy Stock Broking, agrees. “In the last two days, one might get a sense that markets are tiring out a little bit. The falls are sharp and it seems harder to hold on to higher levels. The days ahead would depend on what is said in the capital city.”

Experts feel any small correction would be bought into and the markets are likely to bounce back. But if there is a deeper correction, few might try to catch a falling knife.

“On higher levels, one may find that the money is more cautious, as opposed to rushing in immediately at every dip. A reaction may take the market closer to 4000 on the Nifty,” said Baliga.

There has been a move from the gloom and doom scenario of March to euphoria after the elections. A more realistic outlook may be nigh. But with the budget drawing closer, Delhi cannot disappoint if the markets are to continue their run.