ECONOMY: Stock rally ignites fresh hope

Gorkhs Daju - our financial specialist, far too accurate ?!!

ECONOMY: Stock rally ignites fresh hope – but caution till the games due to overheated run & corruption scandals awaiting to burst the bubble ?!!

FROM THE TELEGRAPH SPECIAL CORRESPONDENT
FORWARDED BY GORKHS DAJU

Mumbai, Sept. 13: Investor wallets swelled by Rs 1,24,281 crore on Monday as the market capitalisation of the National Stock Exchange surged to Rs 68,22,031 crore, an increase of 1.86 per cent over last Thursday.

Let the good times roll - but do be cautious about corrections ?!!

The Nifty was up 119.95 points at the end of a strong bull session at 5760 points.

Monday’s rally came on the back of strong Asian markets as China posted a 13.9 per cent rise in industrial output in August, a robust opening of European markets and a nearly 1 per cent rise in Dow futures.

But Sharekhan’s research head Gaurav Dua said the rally gained momentum because of a strong domestic story built around the 13.8 per cent surge in India’s industrial output in July. The biggest beneficiaries were bank and realty sectors that posted the most impressive gains.

Sensex stocks that hit 52 week highs - all blue chip companies, till scandals break ?!!

The State Bank of India reached its all-time high of Rs 3,175. So did HDFC Bank at Rs 2,294 along with ONGC, Infosys and HDFC (See table).

Oil and gas, public sector stocks and power scrips also fared well while the most lacklustre sectors during the day were automobile and fast moving consumer goods. There were 1,510 advances during the day compared with 1,449 declines on the BSE.

Some market watchers expect the bull run to continue. Mumbai-based brokerage Motilal Oswal’s associate vice-president and senior analyst (technical) Parag Doctor said, “We are probably heading towards an all-time high. I see very little resistance ahead as once the indices have crossed important levels there seems very little reason not to buy.”

Others are equally bullish. Angel Broking’s chairman Dinesh Thakkar said, “Going forward, with the agricultural growth accelerating on the back of good monsoons, which along with the robust growth in manufacturing and services should aid Indian economy to deliver an 8.5 per cent GDP growth in 2010-11”.

The only real worry is inflation that continues to hover above 10 per cent. This has sparked worry that the RBI will tweak its rate signalling reverse repo once again when the policy mandarins sit down on Thursday for the mid-term review of the monetary policy. Talk has swirled about a 25-basis-point hike — which will come on top of the 125-basis-point increase this year in four stages. If it does come, the market is pretty sure it will be last in the current rate hike cycle this fiscal.

“On the flip side, the key concern area is inflation, which is likely to moderate as we go forward, resulting in most of the monetary tightening measures being front ended,” Thakkar said. But that is the only twinge of pain in an otherwise robust environment. “We expect strong earnings growth momentum. The earnings of the sensex pack are expected to grow at an annual compounded rate of 18 per cent. The Indian equities will continue to be sweet spot and will gradually move upwards,” he said.

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