Countdown to 20K begins

It took just four trading sessions for the Sensex to complete the 18,000-19,000 journey. After hitting the 18,000 mark on...

It took just four trading sessions for the Sensex to complete the 18,000-19,000 journey. After hitting the 18,000 mark on October 9, the third largest single-day point rally of 640 points took the Sensex today above the 19,000 mark. The latest surge has happened on the first trading day after finance minister P Chidambaram last week said, 8220;the steep rise in the Sensex sometimes surprises me, sometimes worries me.8221; With heavy inflows from foreign funds continuing, the market has witnessed a solid surge over the past few weeks. From a low of 13,989.11 on August 21, 2007, the Sensex has risen 5,070 points or 36.23 per cent in a short while to a lifetime closing high of 19,058.67 today.

Most marketmen expect the Sensex to hit the 20,000 level soon. 8220;With the Sensex surging so fast, it can hit 20,000 in two or three days. As the FM said, the pace is worrisome and investors should be cautious,8221; said a senior fund manager.

8220;Heavy FII inflows are driving the markets upwards. I fail to understand why there8217;s a sudden surge in foreign money into the Indian market,8221; said BSE dealer Pawan Dharnidharka. On last Friday, when the Sensex tanked by 395 points, FIIs made net investments of 193 million, taking the total investment in the last nine trading sessions to 4.5 billion. This means that FIIs have been pumping nearly 500 million into Indian markets every day.

According to an analyst with India Infoline, as long as FIIs are pouring money into Indian stocks, the bulls will remain in complete command, barring an odd bad day in office like it was on Friday. 8220;The rally will get renewed thrust with the Congress leadership now backing off from the potential confrontation with the Left parties over the Indo-US nuke deal, which now seems headed for the cold storage,8221; he said.

On the flip side, the communists and other UPA allies could make life even more difficult for the Congress till the general election in 2009. So, tough reforms in key areas like insurance, banking, pension funds, retail and FDI will take a backseat. Still, the Indian economy is expected to clock 8-9 per cent growth over the next few years, that8217;s more than good news for the bulls.

What may perhaps play a spoilsport is the RBI8217;s mid-term review on October 30 and a pause by the Federal Reserve at its meeting the next day. With the rupee showing no signs of holding back versus the beleaguered dollar and the finance minister apparently hinting at the Government8217;s discomfort over the relentless appreciation in the local currency and the 8220;copious8221; foreign inflows, the central bank might just go for a CRR hike. So, those betting on lower rates may well have to wait for a while.

The strong IIP numbers for August will make the case for another liquidity tightening measure even stronger. 8220;If this indeed comes true, the market naturally will react and we may see some correction/ consolidation at that time. But, we will have to carefully interpret the tenor of the RBI8217;s statement to determine the mood on Mint Street. In the meantime though, earnings and global trends will drive the market,8221; said a research note by a top broking firm.

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Today, metal stocks hogged the limelight as the BSE metal index surged more than 9 per cent. SAIL surged by over 15 per cent and barged into the Rs 1 trillion market cap club. Reliance, which surged by 3.8 per cent, ICICI bank 4.1 per cent and ONGC 9 per cent contributed the maximum to the Sensex surge. Easing of political worries and improved Index of Industrial Production IIP figures for August 2007 boosted the bourses.

BULLS IN COMMAND

8226;FIIs invest 4.5 bn in October alone

8226;Sensex has risen 5,000 points since August 21

8226;Metal, banking and oil 038; gas shares shine on Monday

8226;Market cap rises by Rs 210,350 cr to Rs 57.90 lakh cr

8226;RIL, ICICI Bank and ONGC contribute to Sensex surge