tyagi
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Whoosh! From 18K to 19K in just 4 sessions
MUMBAI: Four trading sessions — that's what it took the sensex to rally from 18k to 19k, making it the fastest 1,000-point run in the history of the 21-year-old index. If you think that's a milestone, consider this: Over the last month, the sensex has gained 3,500 points. And during this period, four of its five all-time highs were achieved.
"Milestones are a stone's throw away," muttered a derivatives strategist at a domestic brokerage even as the sensex closed at 19059.
The question is, what's feeding the frenzy? The answers at 19K remain what they were at 18K. Unabated buying interest by foreign fund managers because returns from India remain among the best in the world; and expectations that in the future, the Indian economy and corporates will continue to do well.
In any case, these are variables that don't change over four trading sessions. Which is why, foreign institutional investors have pumped $7 billion into Indian stocks in less than a month.
The rush for Indian paper started on September 19 after Ben Bernanke, chief of the US Federal Reserve, cut key interest rates in an attempt to save the world's largest economy from dipping into a recession. Call it the Ben(ji) effect if you will!
He cut interest rates due to the sub-prime mortgage mess. Sub-prime loans are extended to people with low income and hold the potential for default. The gamble American lending institutions took was that with a certain degree of controls, they wouldn't default. But high interest rates in the US started pushing up the numbers of people who couldn't repay the loans.
As it turned out, American banks had a huge exposure to this segment of borrowers and many started tottering under the weight of defaults. The problem had reached proportions that threatened to derail the American economy. Bernanke reckoned that if he cut interest rates, it would be easier for people to service their loans and the financial services sector could ride out the storm.
But investors in the stockmarket saw it differently. It would be some time before the American financial system recovered from the mess it had gotten itself into. In any case, with lower interest rates, returns on their investments would go down. It made sense, therefore, to look at safer markets that offered better returns. Like India.
"India is being looked at much differently today than a few months back," said a dealer at a foreign brokerage. To that extent, India has been re-rated. Going by FII inflows over the last couple of weeks, it is tempting to believe the India re-rating story is playing itself out well.
In the days ahead, institutional players believe FIIs will become specific in their stock selection, but deal sizes will increase substantially. "FII buying is expected to be more stock- specific, driven by strong growth stories rather than broadbased buying," said Naresh Kothari of Edelweiss Securities.
MUMBAI: Four trading sessions — that's what it took the sensex to rally from 18k to 19k, making it the fastest 1,000-point run in the history of the 21-year-old index. If you think that's a milestone, consider this: Over the last month, the sensex has gained 3,500 points. And during this period, four of its five all-time highs were achieved.
"Milestones are a stone's throw away," muttered a derivatives strategist at a domestic brokerage even as the sensex closed at 19059.
The question is, what's feeding the frenzy? The answers at 19K remain what they were at 18K. Unabated buying interest by foreign fund managers because returns from India remain among the best in the world; and expectations that in the future, the Indian economy and corporates will continue to do well.
In any case, these are variables that don't change over four trading sessions. Which is why, foreign institutional investors have pumped $7 billion into Indian stocks in less than a month.
The rush for Indian paper started on September 19 after Ben Bernanke, chief of the US Federal Reserve, cut key interest rates in an attempt to save the world's largest economy from dipping into a recession. Call it the Ben(ji) effect if you will!
He cut interest rates due to the sub-prime mortgage mess. Sub-prime loans are extended to people with low income and hold the potential for default. The gamble American lending institutions took was that with a certain degree of controls, they wouldn't default. But high interest rates in the US started pushing up the numbers of people who couldn't repay the loans.
As it turned out, American banks had a huge exposure to this segment of borrowers and many started tottering under the weight of defaults. The problem had reached proportions that threatened to derail the American economy. Bernanke reckoned that if he cut interest rates, it would be easier for people to service their loans and the financial services sector could ride out the storm.
But investors in the stockmarket saw it differently. It would be some time before the American financial system recovered from the mess it had gotten itself into. In any case, with lower interest rates, returns on their investments would go down. It made sense, therefore, to look at safer markets that offered better returns. Like India.
"India is being looked at much differently today than a few months back," said a dealer at a foreign brokerage. To that extent, India has been re-rated. Going by FII inflows over the last couple of weeks, it is tempting to believe the India re-rating story is playing itself out well.
In the days ahead, institutional players believe FIIs will become specific in their stock selection, but deal sizes will increase substantially. "FII buying is expected to be more stock- specific, driven by strong growth stories rather than broadbased buying," said Naresh Kothari of Edelweiss Securities.