It took Sensex 13 long years, since it was introduced in 1986, to touch 5000-mark in December 1999 and again retouch it in November 2003, after the country’s market went into slump in 2001. However, it has taken less than two years to cross the 7000-mark, which was hardly thinkable even six months back. Also, importantly, unlike the past rallies of 1992, 1994 and 2000, which saw valuations touch dizzying levels, which were not justified by fundamentals, the current rally does not suffer from such aberrations. The valuations are based on strong fundamentals. Increased liquidity driven by foreign inflows, India Inc.’s solid performances, strong GDP growth, good monsoons, solid rupee, burgeoning forex reserves, and the government’s commitment to reforms are some of the major factors which have been behind the sizzling performance of Sensex. Needless to say these factors alleviate any fear of a possible bubble in the making.
However, amidst the elation over the Sensex’s sensational runup past the 7000-mark, a sense of caution has been creeping in as to whether this momentum is sustainable, going forward. This is because, though valuations have not yet reached alarming levels as several experts feel, it is also correct that stocks are not underpriced either. As India story no longer remains an undiscovered story as far foreign investors are concerned, does this signal that the stock market, in general, and Sensex, in particular, is in for a correction |
