Of
late, the common questions asked by investors interested in investing
in the stock markets are: Why is there a meteoric rise in our equity
markets? Have the fundamentals of the Indian economy and Indian
companies improved so drastically in the last few months that it
has made everyone interested in the equity markets? Does this improved
economic scenario help the 500-1000 small cap companies listed on
our various stock exchanges? All these questions will become irrelevant
if one investigates the reasons behind why our equity indices are
reaching new highs everyday. Experts opine that it is the global
equity fund managers, commonly known as the Foreign Institutional
Investors (FIIs), who are behind the current Bull Run.
In
1992, Harshad Mehta, the big bull, was responsible for pushing the
BSE Sensex to new highs. In 2000, it was another bull, Ketan Parekh,
who pushed the equity markets to new levels, and now in 2005-2006
we have another bull run, the biggest of them all. This one is not
because of any identifiable big bull, but a large number of FIIs
who are pumping about $100 mn everyday into the Indian stock markets.
One of the reasons cited by the experts is that the P/E multiples
of leading indices are at a level lower than in the Korean and other
South-East Asian countries, and this is attracting FIIs to Indian
stocks. FII inflows may not slow down immediately. An working
with Sebi has predicted that the Sensex may be well past the 10,000
mark in the next six months.
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