The last two days of trading saw BSE Sensex move up 313 points, or 2.22%, closing Friday at an all-time high of 14,403.77 points.
MUMBAI: The last two days of trading saw the Bombay Stock Exchange Sensex move up 313 points, or 2.22%, closing Friday at an all-time high of 14,403.77 points. The new highs have instilled confidence in market mavens, but they say that the pre-budget rally is yet to happen.
“It’s too early for the pre-budget rally to begin. The tempo builds up in the last two weeks before the budget, when news flows on what is expected from the budget start trickling in,” says Deepak Jasani, head of retail research at HDFC Securities.
He attributes the Indian market rally over Thursday and Friday to stabilisation in the global markets. “The beta (a volatility indicator) of Indian markets is higher than most other global markets, and when they go up, we tend to go up at a faster rate,” adds Jasani.
In seven of the last 10 budgets that were presented in February, share prices went up, giving investors an average gain of at least 5.4% between January and February. This year so far, the Sensex has climbed 4.47% since the last day of trading in December, 2006.
“This cannot be called a pre-budget rally. The markets have anyway been in a rallying mode following positive news flows on companies,” says Ketan Karani, head of portfolio management services at Kotak Securities.
Monday (today) may see some weakness in metal stocks, following a sharp fall in copper and zinc on the London Metal Exchange on Friday, but analysts say the broader momentum is likely to continue.
“India and China are the two hottest markets right now and you just have to pay up (their high prices). I’m less sensitive to valuations and more sensitive to growth,” Joshua Tay, a fund manager at JP Morgan Asset Management, told Reuters on Thursday.
“You do have a feeling that valuations are stretched, but you could argue valuations were expensive when the Sensex was at 6,000, and it has doubled. So what do you do?” he said. He added that this sort of valuation is sustainable so long as companies continued to deliver high growth in the next few years.
For the quarter ended December 31, 2006, companies did not disappoint. “The results have been broadly positive and threw up no negative surprises,” says Kunj Bansal, chief investment officer at Religare Securities. Karani of Kotak is positive on telecom, banking, mid-cap IT and mid-cap pharma stocks.
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