Sensex circus, and road to 40,000 | business | Hindustan Times
Today in New Delhi, India
Jul 28, 2017-Friday
-°C
New Delhi
  • Humidity
    -
  • Wind
    -

Sensex circus, and road to 40,000

The sheer ‘enthusiasm’ demonstrated by some TV channels every time the BSE Sensex inevitably crosses a ‘000 mark reminds me of the days when, as a kid I watched circus, A Kumar tells more.

business Updated: Jul 11, 2007 05:29 IST
Ashok Kumar

The sheer ‘enthusiasm’ demonstrated by some television channels every time the BSE Sensex approaches and inevitably crosses a ‘000 mark reminds me of the days when, as a kid I watched circus. There too, amidst high acoustic cheering and balloon releasing, clowns stood on a single leg atop bicycles, performed cartwheels and several other similar feats.

Now, with 15,000 points on the Sensex being breached largely on the back of strong foreign institutional appetite coupled with the feel-good reflection effect of the global markets, there have actually been discussion on television about this being the beginning of an onward march to the 40,000 points level.

Agreed, interest rates may be close to peaking out and the primary market deluge has been easily absorbed, but to my mind, there are three factors that merit attention. While the first two merit attention in the near term, the third has longer term implications.

The first concern revolves around the impending earnings season. From the look of it, the vertical growth rate that markets have come to expect of corporate India might be running into a bit of a roadblock for now. Since the results season kicks off with IT firms, and more particularly Infosys, the unprecedented decline of the dollar could pinch hard at least in the immediate term.

However, one smart card that Infosys has historically played is to ensure that its guidance is conservative enough to not only achieve, but also exceed. This strategy has worked wonderfully well and diverted attention from its performance on an absolute basis. The fact that the stock in the recent past has been a pale reflection of what it was till a couple of years back, cannot be overlooked.

Then comes the issue of the monsoons. While this word now strikes terror in the hearts of average residents of Mumbai, benefits of a good monsoon on the economy and markets cannot ever be understated. In fact, in the event of monsoons being very good, there is every chance that the government might not wish to stretch its luck across another monsoon and even announce early general elections in mid-2008. It has been a while since we had a bad monsoon, and the markets for one must hope that this is not the year that breaks the positive trend.

The third and the more serious issue, with longer-term implications, revolves around the simmering resentment over widening economic inequalities in the wake of the ongoing second wave of liberalisation. While it is indeed wonderful for market participants (yours truly included) to witness a burgeoning index and resultantly rising stock-holding values, one cannot shut out realities like farmer suicides and the SEZ-induced violence. Mind you, these are merely two visible manifestations of the simmering resentment.

Give it a thought and tread a little more cautiously, lest the euphoria generated by television channels and their so-called expert guests lead you to believe that the Sensex is on a one-way street to the 40,000 points mark.

The writer is CEO, Lotus Knowlwealth, a knowledge based consulting firm.