MUMBAI: The story of Sensex 10,000 is really the story of too much money chasing stocks. Most of the time it was foreign institutional (FIIs) money, but over the last 12 months domestic funds too joined the chase. Between November, 2003, when the bull run began in earnest, and now, the FIIs have pumped in more than Rs 100,000 crore, while domestic mutual funds contributed over Rs 13,300 crore.
During this period, the market capitalisation of Indian stocks soared by Rs 15 lakh crore to Rs 26,15,299 crore. Put another way, every rupee of FII money invested in stocks pushed the overall market-cap up by Rs 15.
FII enthusiasm may explain why the Bombay Stock Exchange Sensex effortlessly soared over several peaks in 2005, crossing 7,000 (June 21, 2005), 8,000 (September 8, 2005) and 9,000 (December 9, 2005) in quick succession. But along the way, the colour of the money changed. If the initial months saw largely traditional FIIs from the west doing the investing, by mid-2005, the oil price spike and Japan’s industrial revival started bringing new investors into the picture. In fact, the last dash from Sensex 9,000 to 10,000 on February 6 saw $ 3.15 billion of FII money coming into the stockmarkets, a significant chunk of it being new money.
“Money has started coming in from everywhere, and there are a number of institutions, especially in West Asia and Japan, that are raising India-dedicated funds. GDP growth is expected to remain above 7.5% next year and corporate earnings are expected to grow by 18-20% in fiscal 2006-07. Though the Indian markets may look a little expensive now, it’s a matter of time before they start looking attractive again,” said Shahina Mukadam, head of research at IDBI Capital.
