Of froth and bubbles
.…. and fundamentals

In 2003, the Bombay Stock Exchange's Sensex index passed what was seen as the psychologically crucial 4,000 mark. It closed Thursday at 14,203.72, and many traders expect it to hit 15,000 this year.

Stock-watching has become an obsession in India, one that rivals cricket and Bollywood. Believing in India's stock markets means believing in India itself — and in the country's ability to transform its combination of a young population, a dilapidated infrastructure, chaotic streets and unbridled optimism into a corporate superpower.

For now, markets in India are on a roll, surpassing even the rosiest forecasts, thanks in part to a young, wealthy, expanding middle class that is banking on aggressive corporate growth. While Alan Greenspan, the former chairman of the U.S. Federal Reserve, is offering warnings about China, Indian indexes have hit new highs drawing in foreign investors and Wall Street banks.

Many Indian companies are looking to take advantage of the fervor. This week, the country's largest public offering came to the market, the $2.4 billion float of the real estate company DLF. Later this month, the state bank ICICI plans to tap markets in India and the United States for $5 billion.

The frothy share prices and large initial offerings are exacerbating a debate in India. Market bulls say a fundamental shift is under way as consumers tie their personal wealth more closely to India Inc., paving the way for a more prosperous middle class. But bears have begun to talk about a bubble fueled by naïve optimism and day trading. Indian investors have forgotten, critics say, the heavy losses they suffered after fraud racked the markets in the early 1990s and the technology bubble broke a few years ago.

Source : As stocks soar in India, everyone wants in (International herald Tribune)

Red ink on the bourses,

Bears are coming back .....

After recording strong gains last year – though punctuated by unprecedented volatility - Indian stock markets have begun the year 2007 on a hesitant note. Are bears coming back? Or is it the usual caution ahead of the earnings season?

Sensex shed over 200 points on Monday, as investors pressed sell button in line with other Asian markets. The fall was led by frontline IT stocks on concerns that the appreciation of the rupee and a slowdown in the US economy might hurt earnings of software. This is the third consecutive day of fall in Indian equity market.

While the 30-share blue-chip index of the BSE today ended 208.37 points down at 13,652.15 (-1.50%), NSE’s Nifty closed 50 points down at 3,933.40 (-1.26%). Besides IT stocks, heavy selling was seen in auto and metal counters. Overall breadth of the market was, however, positive and some buying was seen in mid-cap and small-cap scrips.

The quarterly earnings season kicks off later this week with Infosys results on 11th. While the incoming numbers will drive the sentiments in the coming weeks (and, numbers and guidance are generally expected to be good), there are some uncertainties going ahead. Although economy is expected to post robust growth, there are concerns ranging from high valuations, uncertainty in the metals market to looming interest rate hikes.

Bulls, Bulls Everywhere
DJ 12K, Hang Seng 18K, Sensex 13K, ………

Stock markets across the world are scaling new heights - from US to Europe to Asia. From Wall Street to Tokyo, from Frankfurt to Singapore, from Paris to Manila, from Zurich to Mumbai – there is a bull party going on at the bourses everywhere.

Dow Jones Industrial Average is near its all time high and closed above the 12000 milestone this week registering a weekly gain of 0.4 percent, despite concerns that profit growth has peaked. European stocks rose for fourth consecutive week, led by metals and commodities stocks, as metal prices gained and OPEC agreed to cut oil production.

Hong Kong's Hang Seng Index is at 6-year high and ended the week at 18,113.55 with a weekly gain of 0.7 percent riding on the euphoria generated by the ICBC IPO and strong growth in China Mobile subscriptions. Japan's Nikkei 225 Stock Average added 0.7 percent this week to close at 16,651.63 reflecting robust corporate earnings - marking the fourth consecutive week of gains. South Korea's Kospi added 1.2 percent this week, as the tensions from North Korea's nuclear test ease with diplomacy likely to take the centre-stage. Shares in Singapore and Indonesia are also at new all-time highs.

In India, the BSE Sensex, though generally showing signs of fatigue during the week as it approached the psychologically important 13000 level, ended up on Saturday at a special 75-minute trading session arranged to mark the festival of Diwali. The blue-chip 30-share index had closed at 12,928.18 on Oct. 16 and has been a little hesitant since then. The overall positive sentiment and expectations of strong corporate earnings in the coming weeks is likely to propel the markets beyond 13000.

Mount 13K – An Arduous Climb for Sensex

The Indian stock markets have reached a new all-time high, leaving behind the memories of the “May Mayhem”. A month-long bear grip during May-June this year had knocked down the key indices by about 30%. The crash had been triggered by concerns on higher interest rates following a trend of monetary tightening across the world led by US Federal Reserve, as also high oil prices. These concerns have since receded, as US Fed has ended a two-year streak of interest-rate hikes and oil prices have dropped over 20 percent from record highs. Overseas investors have flocked back to the world’s second fastest growing economy in a big way, as the economy promises sustained growth.

The benchmark sensitive index Sensex of Bombay stock Exchange ended at 12736 on Friday, convincingly surpassing the record close of 12,612 set on May 10. This marks a gain of 45 percent in 90 sessions since the index hit a low of 8800. On a weekly basis, the 30-share index recorded a gain of 2.9 percent, when the quarterly earnings season got off to a flying start with Infosys numbers. More fireworks are expected in coming weeks as more and more numbers pour in. Most of the frontline stocks are likely to report robust earnings growth.

India, the Asia's fourth largest economy, is expected to grow by over 8 percent for the fourth year in a row. The economy grew 8.9 percent in the quarter ended June 30. The Indian growth story is now being seen as much more sustainable than ever before. The growth in Indian economy is expected to be led by the themes of strong domestic demand, outsourcing and infrastructure.

The overseas investors are looking to benefit from the rapid growth and the great long-term story that they expect to unfold. They put a record amount of US$10.7 billion into the Indian market last year and this year's net purchases have been US$5.37 billion. Since June 14, they've bought local shares worth US$2.77 billion, surpassing the amount they sold during the slump. Domestic investors are also contributing to the market's gains in a significant way. Domestic funds remained buyers of stock during the slump, purchasing shares worth $1.12 billion from May 10 to June 14. Since the low in June their purchases have amounted to US$1.78 billion.

Incidentally, the bulls are calling the shots on bourses across the globe. From Dow Jones in US to FTSE, CAC, DAX in Europe and Nikkei, Hangseng, Sensex in Asia – it’s bright and sunny everywhere.