GO SLOW! There are bumps ahead...
Experts point out that some corrections are in order even though the Sensex has a lot of potential for reaching more milestones...
New Delhi: The Indian stock market finally came of age when it closed above the five-digit mark on Tuesday. Now, investors and financial analysts say, the domestic capital market has been put on the global map and is comparable to the Dow Jones index which had touched the five-digit Sensex a few years ago.
“The new high in the market is driven by liquidity because of a large inflow of domestic and global funds. If corporate India continues with the present growth trajectory, we may see higher levels of growth,” said Ratnadeep Acharyya of ICICI Securities Limited. He said the market has the potential to grow further, though there could be some correction.
According to market experts, even if foreign institutional investors (FIIs ) were to pull out of the market – a remote possibility which has to be considered – domestic mutual funds would keep sustain this growth. Till February 3, FIIs had pumped in $3 billion in the Indian economy. They fuelled the Sensex fire and pumped in Rs 13,463 crore between 9K and 10K. Even the domestic mutual funds have raised Rs 9,000 crore in the past one month and a half.
“All this money has to come back in the market, which means that the Sensex will rise further,” said an official from HDFC Bank. Financial advisors, however, cautioned against risk taking by novice investors. They suggested that investors should be focused on their financial goals and stick to safer investment in mutual funds.
Simply speaking: The market is on fire, do not put your finger into it merely for the sake of testing!
UTI Mutual Fund CEO U K Sinha stated that, even at these levels of the Sensex, small investors too will continue to invest as the fundamentals are intact and will only get better from here. “People may not witness 40-50 per cent gains from the markets in the future, but there will not be any reversal either. There can be some short-term corrections, even as markets will continue to get re-rated upward in the medium to long term,” Sinha added.
Investor Rakesh Jhunjhunwala suggested investors can buy, but asked them to be aware that the markets can correct at any level. “We are entering the first stage of domestic inflows... The moment our investors gain, they will invest more. I feel there is humungous amounts of domestic money to come....” By 2010, savings in India is projected to be $410 billion. Even if 10 per cent of this is pumped in, it will be more than $40 billion!
Source: MM report
