What a roller-coaster it has been for the Bombay Stock Exchange’s benchmark! The 30-share started 2008 on a high, but the bumps later were phenomenal: the US-led global financial turmoil, rising commodity prices, inflation and a liquidity problem that froze banks.
But things are looking up now – aiding New Year sentiment. While interest rates are softening, oil has come down from $147 a barrel in July to around $ 33 a barrel.
From a high of 21,206 on January 10 to a low of 7,697 on October 27, the fall was 63.7 per cent, thanks mainly to global pressures. That gave India a lesson: global opportunities carry global risks.
The decoupling theory – the belief that India’s economy was safe from American typhoons -- does not exist for financial markets. “Real economy is different from financial leverage because problems in any market impacts the flow of money,” said Aseem Dhru, chief executive officer, HDFC Securities.
The situation as it stands now is of low demand and falling interest rates, but with a rise in inventories that could choke an early industrial revival.
Experts believe that low interest rates and a fall in commodity prices should reduce input costs and improve profitability in 6 to 9 months for Indian companies.
“While the corporate profits will remain week till first quarter of 2009-10, demand should come back by the second quarter low cost low price economy should take off,” said Anup Bagchi, executive director, ICICI Securities.
The coming year thus seems to be a year of consolidation.
“They will not be very aggressive in leveraging and will be cautious in their new ventures,” said Divyesh Shah, chief executive officer, Indiabulls Securities.
Euphoria has given way to balance. The Sensex in the meantime is expected to be in a range bound movement between 9,000 and14,000. Things could improve after six months, experts say.