MUMBAI: Having tasted 4,000 on Friday, the National Stock Exchange Nifty is almost sure to close above the mark next week. In fact, optimists are counting on two windfalls in the coming week, what with the BSE Sensex also well within sight of 14,000.
“The Sensex can possibly test the 14,000 levels next week, riding on positive sentiment,” says Ajay Parmar, head of ideas research at Emkay Share and Stock Brokers. He feels confident that the Nifty will also make the cut above 4,000.
Even as the indices are heading upwards at breakneck speed, some analysts are advising caution, as valuations look rich. However, another set feels that the lack of euphoria and high levels of sceptisism are good signs. “In May, everyone was shouting at the top of their voices. This time, the fear of a steep fall is less since the pitch is low and investors are treading with caution,” says one market maven.
Prem Daga, an independent technical analyst, says it would be misleading to indicate a timeframe within which the indices will hit their psychologically significant marks. “As long as the May highs on both the indices hold as supports, the Nifty can make 4,400 and the Sensex, 14,900,” he says.
Both foreign institutional investors (FIIs) and domestic funds have supported the rally thus far. Good corporate earnings and excellent economic growth (GDP growth of 9.2% for the quarter ended September 30, 2006) have pushed them to keep their money taps on. While FIIs have bought Indian equity worth $8.8 billion (Rs 39,791 crore) this calendar so far, domestic mutual funds, which have raised huge sums from new fund offerings, have deployed around $3 billion (Rs 13,684 crore) into the equity market. If these two flows continue, they will act as a cushion to any sort of short-term correction, says an analyst.
And if Stuart Smythe, head of equity in India for Macquarie Securities, is to be believed, FIIs are now beginning to take a closer look at India. “More investors from overseas are now having to look at India as a serious market rather than a speculative one, because of its relative size and performance in the region. Investors will have lost valuable alpha by not having participated in this latest rally. This phenomenon should continue to act as a catalyst underpinning the market’s performance,” says Smythe.
On Friday, the Nifty briefly made an all-time high of 4,001.30 points, before declining to close at 3,997.60, a new closing high. The Sensex closed at 13,845, up 148 points.
In the 214 days it took for the Nifty to move up 1,000 points to 4,000, the Sensex gained almost 4,000 points - 3,996 points to be precise. It closed on Friday at 13,844.78 points, up 148.47 points (1.08%) from its previous close.
“International investors have been making quarter-by-quarter assessments of the Indian markets. They are justifying the high multiples that the markets are trading at now by the earnings performance of Indian companies,” says Smythe.
Going ahead, the run-up to the budget and the big-ticket IPOs lined up could act as further triggers for the bull charge.
Stockistics
NSE’s index took 214 days to navigate the last 1,000 points
Sensex well poised for assault on peak 14,000 shortly
Foreign investors are looking at India closely once again
