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The year of the bull

Markets witnessed many tumultuous events, but none of these could halt its march, writes Arun Kumar.

india Updated: Dec 31, 2005 12:02 IST

The year 2005 will inarguably go down in history as the golden year on the Indian stock market. Bulge bracket foreign institutional investors dominated the show ploughing in close to $11 billion into the Indian equity market.

And as if that wasn't enough, there was a second force propelling the market. Domestic mutual funds, which have remained somnolent for ever so long, poured in Rs 10,700 crore between April and December as the BSE Sensex vaulted from 6,602 points on December 31, 2004 to 9,398 on December 30, 2005 a jump of 41 per cent. Between the FIIs and domestic mutual funds, a cumulative investment of over Rs 55,000 crore has come in this year.

This big move was not always unidirecional. In fact, the market witnessed many tumultuous events, but none of these imponderables could halt the march. That is because the overall trend was secular.

The market was in many ways like a good old Hindi film - it had emotion, drama, conspiracy theories, maybe no romance, but certainly gravity-defying action. When the market dived by 1,200 points as the rupee went soft against the dollar, speculation was rife that intelligence agencies had been roped in and a mega investigation was on.

Prime Minister Manmohan Singh singled out specific media for leading the hoi polloi up the garden path and stated categorically that no investigation had been ordered. While order was restored, the exchanges in conjunction with market regulator SEBI decided to clean up the system, nipping the speculative bubble in the bud by going after penny stock manipulators.

Overnight perception changed. With all and sundry realising that the Indian market was not just well-regulated but also has excellent risk management systems in place, it was business as usual. Since the induced correction, the market has not just recovered, but sashayed into uncharted territory.

The question dominating everyone's mental space was why this unprecedented demand for Indian equity? In 2005, global perceptions towards India changed dramatically. The rerating of India Inc became a theme all over the world. It was not just the western world which was focusing on India, but Japanese, Korean, Taiwanese and even Norwegian investors, because everyone believed that the growth story was not just realistic, but a long-term one and sustainable. For two consecutive years, GDP rate is expected to a grow at around eight per cent.

Led by the bull run in the secondary market, the primary market also enjoyed a resounding success in 2005. Over Rs 15,000 crore were mobilised during 2005 through the primary market route by 22 companies. Among leading companies which entered the market were ICICI Bank, Jet Airways, Oriental Bank of Commerce, Yes Bank, Allahabad Bank, Dena Bank, IDFC, Suzlon Energy, Punjab National Bank, Punj Lloyd and PVR.

First Published: Dec 31, 2005 12:02 IST