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Tuesday, Oct 31, 2006

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`Stay invested, but with parachutes'

Rasheeda Bhagat

The new peak

BEST-EVER FINISH: Delighted young investors are at a share trading office in Kolkata as the market rallied on Monday. The Sensex rose sharply on the back of fresh buying to scale a new peak of 13,000 mark and finished at 13,024.26, up 117.45 points over its previous day close - A Roy Chowdhury

Chennai , Oct. 30

The BSE index crossed the magic mark of 13,000 on Monday, but if the earlier exuberance evident at 11,000 - 12,000 and even 10,000 levels was missing. "With the Sensex at 13,000, people should have been dancing in the streets, but we did not see that because people have not made money," said Mr Arun Kejriwal of Mumbai-based KRIS (Kejriwal Research and Investment Services).

He said that despite the Sensex at 13,000, the market-cap is lower than on May 11, 2006, after adding several IPOs. "The Sensex has only 30 stocks and can be driven up by a few stocks. The Nifty 50 has barely managed to pass the earlier high, and the BSE 200, NSE 200 and 500 are way below the May-11 mark." Stocks held by retail investors had not gone up, as typically this group holds small and mid-cap stocks.

Mr Sandeep Shenoy, Strategist at Pioneer Intermediaries, Mumbai, said he has been advocating caution since 11,800, "but the liquidity is so strong, that our advice that the market appears overheated does not find too many takers."

"We are asking people not to put in new money, and remain invested if they are already in the market, but they should keep their parachutes ready." In the mutual fund industry the mood is bullish, says Mr T.P. Raman, Managing Director, Sundaram BNP Paribas Asset Management. "The investors are quite happy, they have made money; the Q2 results have been very good and Q3 and Q4 are expected to be on line; the GDP growth, monsoon and global queues are good too. So this time there is no fear in the minds of analysts and wealth planners that this is an artificial boom."

With the FII participation being strong too, there was confidence among retail investors. Some of the HNIs might be booking profits but overall there was no negative feeling and "everyday our equity funds are seeing very good retail inflows," he added.

A spokesman of DBS Cholamandalam Asset Management in Kolkata confirmed that retail flows were coming in "not only from the bigger cities in the eastern region but also the smaller towns." But even though the market mood was upbeat, he was advising his clients to take a long-term view through the SIP (systematic investment plan) route, with a three to five-year horizon.

The word on the street in Mumbai is that "smart investors", particularly HNIs, are booking profits, expecting a correction.

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