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Nifty kisses 5,000 again, optimism back

business Updated: Sep 18, 2009 00:18 IST

Hindustan Times
Highlight Story

Encouraged by revival trends in the global economy and an infusion of cash, the 50-share Nifty of the National Stock Exchange kissed the 5,000-mark on Thursday – the first time after a 16-month-long nerve-wracking downturn in the
markets.

The momentary flirtation with the psychological milestone did not last too long. The index closed at 4,965, with a mild gain of 13 points — 22 per cent short of its January 8, 2008 all-time high.

The 30-share Sensex of the Bombay Stock Exchange, the more quoted benchmark, too gained, rising 34 points to close at 16,711.

While Nifty has gained 93 per cent since March 9 when the upward rally began after touching a low of 2,573, it has outperformed all the major markets of the world barring that of Argentina which has generated a return of 108 per cent in the same period. Indonesia follows closely with a return of 91 per cent.

The Sensex has outpaced the Nifty in returns, rising 105 per cent over the period. Can the momentum sustain? Experts seem unanimous on the fact that the liquidity is strong and there are signs of a good earnings growth – the crucial inside detail of corporate accounts that propels markets.

“It is a liquidity-driven rally and quality money is coming in,” said CJ George, CEO, Geojit, BNP Paribas Financial Services.

While the liquidity is expected to remain strong a good growth in the advance tax numbers paid by companies has also pushed the market sentiment up.

“We can expect positive surprises on the front of corporate earnings,” said Anup Bagchi, executive director, ICICI Securities.

“The momentum is likely to continue for now as the fears on account of monsoon, inflation and global economy are receding and good corporate earnings are expected,” said Aseem Dhru, CEO, HDFC Securities.

While the growth is expected to continue the market players do not see the high valuations as a matter of great concern.
“The markets are trading at a PE (price-to-earnings) of 18-19 on 2010 earnings and the PE to growth ratio is fine for the Indian markets,” said Dhru. “The high PE looks justified.”

While many feel they have missed out on the recent six-month rally, experts feel investors looking at a longer horizon may still do well to put in some funds, though in a spread-out fashion, and avoid lumpsum investments.

“One should invest at regular intervals to beat the ups and downs of the market fluctuations, since it is time in the market which is more important than timing the market,”said Rajesh Sud, CEO, Max New York Life Insurance.