Sensex surges to fresh high

The rally has gathered momentum after the budget on the back of strong liquidity and strong appetite for stocks from foreign and local investors. The index — now at 6849.48 — is now only 150 points away from the magical level of 7,000.

“Domestic investors have joined the buying spree after Monday’s pro-growth budget that stepped up spending on infrastructure and lowered corporate taxes. The market has ignored irritants like the fringe benefit tax and the cash withdrawal tax,” said NSE dealer Pradip Bhavnani.

But who is driving the market these days? Foreign funds have ploughed in $94 million on an average in each of the past 22 trading days into stocks, taking the total to $2.35 billion so far this year. That compares with $8.5 billion in the whole of 2004.

“The undertone of the market is expected to remain optimistic with sustained fund inflows on the back of a strong growth story,” said Motilal Oswal of Motilal Oswal Securities.

On Friday, the 30-share Sensex rose steadily through the session to touch its new high of 6,864.62 towards the close before settling at 6,849.48, gaining 64.76 points, or 0.95 per cent, over its previous close, thus bettering its previous best on Thursday. The fancied index gained 144 points on Monday — the Budget day.

The NSE S&P CNX Nifty index touched its lifetime high of 2,152.75 in the intra-day trades before settling at 2,148.15, up 19.30 points, or 0.91 per cent, on Friday.

Mutual funds — flush with funds following substantial collections from IPOs of new equity schemes — are also major investors. Over Rs 3,000 crore was raised by mutual funds in the last two months. A fund from Franklin Templeton raised around Rs 1,900 crore recently.

However, a host of market participants raised concern over the runaway rally in stocks. “It’s dangerous for small investors to enter the market at high levels. They should wait for a correction,” said a fund manager.