Diwali 2008 to Diwali 2009, the Bombay Stock Exchange Sensex has risen 92%, the best return by the index in the last 20 years.
Diwali 2008 to Diwali 2009, the Bombay Stock Exchange Sensex has risen 92%, the best return by the index in the last 20 years. Investors profited by an average Rs12,440 crore every day of trading in Samvat 2065 as their wealth more than doubled from Rs27.66 lakh crore to Rs56.77 lakh crore.
Almost every third actively traded stock doubled in the year. In all, there were nine shares that gained for each that lost. Can such a heady run continue in Samvat 2066?
“Though markets are riskily valued right now, momentum and liquidity are driving prices. The confidence level is high. Earnings in the next two quarters would set the tone for the road ahead. We believe the Sensex may touch its previous highs in the next 12 months,” said Raamdeo Agrawal, MD of broking house Motilal Oswal Securities.
“As for sectors, auto and banking look interesting for the coming year. Steel and
cement may surprise,” Agrawal said. The rally has been primarily fuelled by foreign investors, who have plonked Rs63,572 crore — or Rs272 crore every trading day.
Domestic institutions weren’t far behind. Out of the 2,264 actively traded stocks on the BSE, 2,066 gave positive returns while only 198 wallowed in the red. There were nine little known multi-baggers in total which gave mammoth 10 to 46 times returns —- Kwality Dairy (4,600%), Well Pack papers (3,400%) and Avance Technologies (2,500%).
“The way stocks have risen, valuations are little expensive at this point of time,” said Ajay Parmar, head of research at Emkay Global Financial Services. Sensex price-earnings ratios are nudging 20 times whereas a traditional, conservative valuation is seen between 17% and 18%.
“However if we look at the kind of GDP growth India is targeting over the next 2-3 years, we will definitely see better earnings in the coming quarters, which should support the market,” Parmar said. He is bullish on consumer goods, infrastructure, engineering and auto shares.
Parmar said the worst seems to be over. The monetary policy announcements of the Reserve Bank of India, exchange and interest rates and inflation will decide market movement over the next 3-4 months, he said. VK Sharma, head of research at Anagram Stock Broking, said corporate results will have to justify the earning upgrades being done.
“The results should reflect growth coming from demand and robustness in sales rather than on account of cost cutting and increase in other income,” he said. He is looking at innovative technology and domestic consumption sectors such as gas pipeline companies and the geospatial information services (GIS, or companies that do terrestrial mapping) segment where the potential for growth is “huge for the next 2-3 years”. Banking is also a sector Sharma is bullish on.
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