The Hindu Business Line : Sensex story: From 13K to 14K in 26 sessions

With the Sensex having made yet another record high touching 14028, we look behind at the road that the benchmark index has traversed in its journey from 13,000 to 14,000.

This has been a rapid-fire move achieved in just 26 sessions. The sector that powered this move was the banking sector. The top rung banking stocks such as SBI and ICICI Bank moved up sharply due to a continued growth in the retail loan off-take and the relative under valuation of the banking stocks in the Sensex basket.

Draggers

Capital goods and IT sectors were the other outperformers. Metal stocks dragged the index down due to weakness in base metal prices in international markets.

The BSE Smallcap Index trailed behind the Sensex in the last one month pointing towards buying being concentrated in high quality stocks with good performance track record. Cement stocks saw some renewed buying interest spurred on by strong despatch numbers this quarter. Auto stocks were among the laggards due to concerns regarding high input costs, rising fuel prices and price wars impacting the bottom-line.

Global Markets

A closer look at the global equity indices in the last one month shows us that BRIC countries as a whole outperformed the other equity markets. China was the top gainer among the BRIC markets in the last one month with a gain of 16 per cent. India ranks fourth after Russia and Brazil.

As the Federal Reserve and other Central banks halt the interest rate hiking cycle, the global funds are once more eyeing emerging markets with high economic growth rates as a source of making high returns.

India stands in the forefront as a destination of attracting such funds.

With the Sensex PE at 22.97, our markets cannot be called cheap by any stretch of imagination. The road ahead can be strewn with obstacles in the form of further interest rate hikes by RBI in a bid to contain inflation, strengthening rupee impacting exports, slow down in the US and Chinese economies and crude prices moving up.

But in the last three years, liquidity has over-ridden all arguments to take prices to astronomical heights.

That situation seems set to extend into the future as well.