New Year Friday is 6000 Friday

The euphoria was immediate. ‘‘The LIC has targeted almost Rs 3,000 crore profit from its stock market operations, which I think will shoot up even further,’’ said R N Bhardwaj, managing director of Life Insurance Corporation.

The index crossed the magic mark for the first time since February 2000. It flirted briefly with 6000 during the technology boom, but this is the first time the market has closed above this level.

This time, it was an unprecedented eight month burst—from 2930 in April 2003, the rally is the fastest in the history of the Indian capital markets.

‘‘It is gratifying to see the Sensex hit 6,000. But I would have been happier if this level had been reached gradually,’’ said Ishaat Hussain, executive director (finance), Tata Sons.

Hopes and expectations have propelled the markets especially in the last two months after the Sensex burst through the 5000 barrier. There’s been no customary correction. Analysts, punters and even the government have been peddling the feel-good stories and views.

Still, most were surprised by the latest leap. ‘‘So soon!’’ exclaimed A P Kurian, chairman of the Association of the Mutual Fund Industry. ‘‘We have all been expecting the market to touch the magical 6,000 mark… but not so soon.’’

Cut to 2000. The Sensex had touched its all-time high of 6,150.69 in intra-day trades on February 14, 2000, but had ended at 5,924.31. ‘‘As and when the market breaches that last top, it is going to be a case of another great high,’’ said Nimesh Kampani, chairman and managing director, JM Morgan Stanley.

Since then Sensex had a roller-coaster ride, but mostly controlled by bears. The turnaround came in May 2003. The benchmark index gained a whopping 72.8 per cent in 2003, making it the second best performer in Asia behind Thailand, thanks to the foreign investors who are pouring in money.

Market watchers are reeling out statistics on economic growth, farm sector recovery, the resurgence of the manufacturing sector and good foreign fund inflows as reasons for the bull phase. ‘‘The economy as a whole is firing on all cylinders and we expect that most sectors will do well,’’ said PGR Prasad, managing director of SBI Mutual Fund.

The feeling on the street is that bull run will continue in the year 2004 on the back of strong economic and corporate fundamentals. With the end of the December quarter, expectations are being built up over forthcoming corporate results.

Fund managers say inflows by FIIs are likely to sustain in 2004 after the record inflows in 2003. FIIs put in Rs 35,153.80 crore or $7.590 billion in debt and equities combined in 2003, a record for a single year ever since FIIs were allowed to invest in the Indian bourses in 1992.

‘‘But this could reverse if foreign markets and economies start doing well,’’ warns R Balakrishnan, CEO of First India Mutual Fund.

Is the rally for real? There are skeptics. ‘‘This is purely sentiment driven. The US economy grew by a whopping 8.2 per cent in the last quarter. But Wall Street is not shooting up like India. China’s economy grew nearly 9 per cent in the last quarter but its main Shenzen index rose by only 45.5 per cent last year,’’ said the CEO of a mutual fund.

The market regulator has been cautioning investors for the last six months. ‘‘We are watching market activity closely as it seems to have grown too fast,’’ Sebi chief G N Bajpai said.

On Thursday the Sebi chief said investors should ‘‘take informed decisions by studying developments and risks and rewards associated with the investments.’’

But punters and funds are not in a mood to listen. Unlike 2000, the 2003-04 rally is being led by old economy stocks. Some of them have soared to dangerous levels: Grasim has shot up by 270 pr cent in the last 12 months, Tata Steel by 418 per cent, Sterlite by 1077 per cent and Mahindra & Mahindra by 397 per cent.

‘‘This is temporary as the rally is confined to a particular segment. So far, the India story has been good and so the foreign investors are pouring in money. The moment they find a better market, they will run away. You need to develop domestic investors,’’ said Deepak Parekh, chairman, HDFC.

But the debacle of 2000 is still fresh in the memory of some investors. The Sensex had crashed from the 6000 level after a series of scams surfaced.

For investors this could just be the right time to sell their shares and book profits.