Stock analyst and Dalal Street trade pundits have predicted that sensex is going to touch 11K very soon, maybe by Jan,06 end. The Sensex already crossed the historic 9k mark on 12th December and closed at an all time high of 9133 after gaining 66 points. The stocks yesterday were moving in line with the other Asian markets. Today, when every one was expecting sensex to fall in anticipation of heavy selling, it gained another 133 points and closed at 9263.90 and created another all time high.

The sensex gained momentum on reports that the country’s industrial output has increased in October due to robust manufacturing. Also identification of 15 PSUs by the Government for divestment further added the much required oil in the fire. It has been reported and repeated over and over again that the economy is growing and there is all round developement in the country leading to such an impact on the Sensex.

To the best of my knowledge, BSE Sensitive Index started in year 1985 and gained 6000 points in 20 years and another 3000 points (i.e 50% of what it gained in 20 years) in just a matter of 6 months. So, is our economy growing at such a fast rate. I agree that India and China are one of the fastest growing economies as on today but is the stock market growing just because of that?? Is the Indian stock market riding high on the fundamentals or is it just the sentiments???

A question very hard to answer as lot of people are talking about lot of reasons attributing to this fastor. Some are talking about the Japanese money comming in and some are talking about other foreign investors investing in India leading to a very high Liquidity. Others are speculating that the number of retail investors investing in India has increases by leaps and bounds and substantiating it on the basis of the number of demat accounts being opened in the remotest part of the country like Arunanchal or J & K. Some are also speculating that the Dabba trading which was prevalent during the early 90s is back.

In the given situation where no one knows what is going to happen next, the sensex may rise to 11000 or may not. But one might ask whether to invest in such a situation??? I guess one should be very cautious while investing and take a stock specific and a sector specific approach. But yet you never know as it is said that ‘Even GOD doesnt know what would happen in a stock market’.

Madhur Khandelia

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