The bulls may come marching in
Ninad Dhirubhai Sheth
On the Richter scale, the victory of the Manmohan Singh lead UPA government, can only be described as super seismic. As if on cue, the stock market went ballistic, rising 2110.79 points and shattering the circuit in 60 seconds.
This is the fastest ever single day rise of the Bombay sensitive index, indeed it is the fastest single day rise anywhere in the world. Although it was all over in just a minute - it added a phenomenal 566,881 crore in investor wealth.
So will the party last of are there enough structural issues that will ensure that a bear grip stays on the stock market?
Says Vikas Seth, director of my money securities, an investment firm, “The rally is real, however for it to be sustainable, two factors will be crucial, the first is fiscal deficit. Even at these levels it is posing a threat to the system as it accentuates government borrowing and crowds out private investment. The other thing to keep an eye on is the appetite that the new government will have for disinvestment of government owned public sector companies. On a positive side, the stability of this government will give it confidence for a bold budget and that will in itself provide a boost to the markets.”
The disinvestment plan of this government, according to finance ministry sources, is likely to be aggressive. It will aim at generating over 100,000 crore from the markets. There are 26 profit making PSU’s that could be on the block over the next few years. Says a Mumbai based banker, “Bombay is certainly bullish, and there is a lot of momentum expected on the disinvestment front. If the budget comes out with some bold reforms, and if, as is expected, the monsoons are good we may be looking at a major rally on the stock markets this year.”
One concern is that in two days the BSE listed stocks price earnings ratio shot up from 16.61 on may 15 to 19.48 on may 20th giving it a distinct casino feel. Says Ajay Parmar, head of equity research, at Enkay securities, a brokerage in Bombay,“The PE ratio will come down. While the mood is bullish one needs to wait for sequential policy measures to have an impact on the ground. Till then it would be a mistake to go euphoric at the rally. Wait is still the watch word. “
The prediction from various stock broking houses is looking optimistic. There is a momentum in the market and some believe that the market could reach as high as 20,000 by December. The consensus looks like the sensex reaching 16,000 levels.
Just as India enters a new period of stability, so the markets look set for a new phase of bullish activity. The time it appears is right for investing, not withstanding that some doubts remain on the fiscal front. Get set for what looks like the beginning of a new bull run on the Sensex. For the retail investor however it is important to add a dash of rationality to the exuberance on display.
Ninad Dhirubhai Sheth
On the Richter scale, the victory of the Manmohan Singh lead UPA government, can only be described as super seismic. As if on cue, the stock market went ballistic, rising 2110.79 points and shattering the circuit in 60 seconds.
This is the fastest ever single day rise of the Bombay sensitive index, indeed it is the fastest single day rise anywhere in the world. Although it was all over in just a minute - it added a phenomenal 566,881 crore in investor wealth.
So will the party last of are there enough structural issues that will ensure that a bear grip stays on the stock market?
Says Vikas Seth, director of my money securities, an investment firm, “The rally is real, however for it to be sustainable, two factors will be crucial, the first is fiscal deficit. Even at these levels it is posing a threat to the system as it accentuates government borrowing and crowds out private investment. The other thing to keep an eye on is the appetite that the new government will have for disinvestment of government owned public sector companies. On a positive side, the stability of this government will give it confidence for a bold budget and that will in itself provide a boost to the markets.”
The disinvestment plan of this government, according to finance ministry sources, is likely to be aggressive. It will aim at generating over 100,000 crore from the markets. There are 26 profit making PSU’s that could be on the block over the next few years. Says a Mumbai based banker, “Bombay is certainly bullish, and there is a lot of momentum expected on the disinvestment front. If the budget comes out with some bold reforms, and if, as is expected, the monsoons are good we may be looking at a major rally on the stock markets this year.”
One concern is that in two days the BSE listed stocks price earnings ratio shot up from 16.61 on may 15 to 19.48 on may 20th giving it a distinct casino feel. Says Ajay Parmar, head of equity research, at Enkay securities, a brokerage in Bombay,“The PE ratio will come down. While the mood is bullish one needs to wait for sequential policy measures to have an impact on the ground. Till then it would be a mistake to go euphoric at the rally. Wait is still the watch word. “
The prediction from various stock broking houses is looking optimistic. There is a momentum in the market and some believe that the market could reach as high as 20,000 by December. The consensus looks like the sensex reaching 16,000 levels.
Just as India enters a new period of stability, so the markets look set for a new phase of bullish activity. The time it appears is right for investing, not withstanding that some doubts remain on the fiscal front. Get set for what looks like the beginning of a new bull run on the Sensex. For the retail investor however it is important to add a dash of rationality to the exuberance on display.
