It took almost a year for the Bombay Stock Exchanges benchmark index,the 30-scrip Sensex,to return to the 18,000 level last week from 15,000. The 20 per cent rise came despite a continuous climb of the WPI-based inflation rate. Though the widely-tracked marker which hit the 15,000 level in the first week of June 2009 closed down by 123 points at 17,868.29 on Friday,it has been moving up gradually over the last 12 months as sustained foreign fund inflows and the recovery in the GDP growth boosted the investor sentiment. Analysts say that most of the blue chips participated in the 3,000-point rally in the last one year. The rise was more pronounced in sectors like automobiles,IT,banking,commodities and capital goods with leaders in these segments contributing maximum to the bull run. These stocks are major constituents of the Sensex. I think almost all the sectors have played some role or the other to push the Sensex from 15,000 to 18,000. But the top three sectors that gained the maximum are capital goods,banking and commodity. The first two have major contribution in driving the BSE benchmark to such levels,while commodity sector played the role partly,if not fully. The reason could be none other than the large growth in their respective businesses, said Deven Choksey,MD & CEO of KR Choksey Securities. Consider the case of TCS,the leader in the IT segment. This stock rose by 138 per cent from Rs 354 (when the Sensex was at 15,000) to over Rs 840 now. Tata Motors gained 126 per cent during the same period,M&M 83 per cent and Hindalco Industries 75 per cent. Most of the market leaders in these segments are big cap companies with high weightage in the Sensex. Sector-wise,tyres gained the maximum with rubber and automobiles following in the second and third spots. The market recovery after the big fall of 2008-09 amidst the financial turmoil was not limited to big caps alone with mid- and small-caps joining the bull run subsequently. Cadila Healthcare was the top gainer in the A group of the BSE with the stock gaining 183 per cent during the 3,000-point Sensex rally. Castrol gained 180 per cent and Procter & Gamble rose by 147 points during the Sensex movement. In the auto sector,Ceekay Daikin shot up by 414 per cent,Jamna Auto 366 per cent and Force Motors 330 per cent. Said Sunil Shah,director of Khambatta Securities,It is true that some of top Sensex-30 list companies are responsible for pushing the Sensex to this level today. But as far as sectoral gains are concerned,banking,automobile and FMCG companies were quite aggressive and helped index with their good performances. For the last 3-4 months,we have seen demand taking an upward movement after Sensex crossed 15,000 mark. Most of the companies in these sectors have already taken up the rural theme to drive their growth to the optimal level,while the global theme has taken a back seat in some way or the other. I hope it will continue till it reaches 20k-level in another six months or so. What are the major factors that drove the Sensex? The main reasons were the improvement in the economy,the huge correction in fiscal deficit due to 3G and 2G auction,continuation of austerity measures,stable interest rates,massive increase in domestic consumption and global rise in liquidity the currency. Stocks like Infosys,Larsen,BHEL,SBI and other heavyweights contributed to the18K destination of the Sensex. The rise in these big caps was around 20 to 25 pc which is in tandem with the Sensex rise, said Kishor P Ostwal,CMD,CNI Research Limited. According to analysts,interest rates and inflation are expected to play a major role in the Sensex movement in the coming months. The current scenario is similar to 2004,when market multiples and short-term yields were positively correlated after the initial rate hike. The stock market has soared even as interest rates increased and we believe it will continue to do so. The risk is if inflation is not pegged at an appropriate time then multiples could contract. The RBI has to successfully convince the market that it is pegging inflation expectations at the right time. Even if there is no substantial multiple expansion,we do not expect them to contract either, said an analyst with Edelweiss Securities.
