Sensex cracks 8K and counting

Investor wealth touches Rs 21.96 lakh cr; Index trading at price-earnings multiple of 16.7.

The Sensex reached the magic figure, finally, stretching gains from the start of the year on optimism about robust corporate earnings in a fast expanding economy.

The index gained 106 points, crossing the psychological 8000-point mark and closed at 8052.73, closer to the intra day high of 8060.

In the past seven sessions, the Sensex gained over 418.13 points, or 5.47 per cent. The National Stock Exchange's Nifty rose 25.80 points or 1.06 per cent to close at 2454.45.

The markets opened firm and held on to its gains on a strong buying support from foreign and local fund buying, said dealers. Softer crude oil prices, which slid to around $65 from $70 last week, only helped market sentiments.

The turnover on the Bombay Stock Exchange jumped 23 per cent, powered by block deals, compared with a 5 per cent rise in turnover on the NSE. Ironically, the derivatives turnover fell by 9 per cent to Rs 11,883 crore.

Interestingly, the derivatives market did not quite signal equal bullishness. The Nifty futures closed at 2446, a discount of 0.35 per cent, up from 0.24 per cent. The put-call ratio also was high at 1.31, compared with 1.12 in the last session, indicating more caution.

However, delivery trades as a proportion of the total turnover had been inching up, partly due to more stocks in the trade-to-trade category, which was comforting, said dealers. Delivery trades stood at 68.55 per cent, up from 66.33 per cent at previous close.

At current levels, the BSE commands over Rs 21.96 lakh crore of investor wealth.

Market experts are amazed at the pace of the rally. Though some analysts felt that valuations were now looking stretched, there was no real reason for the trend to reverse with the market flush with funds. Currently, the Sensex is trading at a price-earnings multiple of 16.70 times and that is close to the historic average P/E over the past decade.

Domestic mutual funds are sitting on a pile of cash due to good collections in the new fund offerings.

Foreign investors are also keeping faith in Indian equities. Till the end of August this year, Indian markets have attracted a third of the total foreign fund flows into Asia. Only Taiwan attracted more money than India. Since the beginning of this year till date, FIIs have poured in Rs 33,955 crore.

Based on MSCI indices, India (16.96 per cent) has been the fourth biggest gainer among the Asian (ex-Japan) markets after Sri Lanka (41.23 per cent), Pakistan (31.81 per cent)and South Korea (27.90 per cent).

Going forward, experts felt that the markets' movements would be driven by the earnings' numbers. The across-the-board rally may not continue and movements will be more stock-specific. While no major decline was expected in the near term, investors should be prepared for a correction, dealers said.

While higher oil prices remained a cause for concern, given its impact on consumer prices, interest rates and corporate profitability, analysts still did not see that as a major threat to stock market performance.

In today's trading, the key Nifty gainers included bank and steel shares.

ICICI Bank and HDFC Bank were up 3 per cent and 2 per cent, respectively, while Tata Steel and Steel Authority of India were up 1 per cent each.

Wipro, Ranbaxy Laboratories, ITC, and Hero Honda were among the major Nifty laggards. The CNX Midcap Index tracked the broad market trend to end at 0.7 per cent at 3754 45, slightly off its record high of 3756.70 touched during intra-day trading.