The Hindu Business Line : Sensex crosses 6,000, closes at historic high

A street sign near the Bombay Stock Exchange's Jeejeebhoy Towers on Dalal Street seems to reflect the mood of the stock markets as the Sensex closed at an all-time high of 6026.59 points. The index had last touched an all-time intra day high of 6150.69 on February 14, 2000. - - Paul Noronha

Our Bureau

Mumbai , Jan. 2

AS trade and growth indicators revealed a gilt-edged economic performance, spirited investors poured money into Indian equities taking the country's oldest stock index, the BSE Sensex, to its historic high on the second day of the new year. The 30-share Sensitive Index (Sensex) of the Bombay Stock Exchange closed today above 6,000, the first time since its inception in 1986.

It may not yet be the peak as investors seem willing to risk more money in equities saying that valuations are still attractive.

"We have seen some very conscious buying by investors until now. I do not think the valuations are overstretched yet. The index is trading at a price to earnings multiple of roughly 18, which is not very high," said Mr A.K. Sridhar, Chief Investment Officer of UTI Mutual Fund, which manages over Rs 19,000 crore of investor assets.

The Sensex, perhaps the most widely accepted barometer of the Indian economy, rose 111.12 points to end at a record 6,026.59. Its previous high closing level was on September 12, 1994 when it ended at 5,933.56. The highest it has scaled was on February 14, 2000 when it touched 6150 but retreated to close at 5,924.31.

The National Stock Exchange's 50-share S&P CNX Nifty set a new closing record of 1,946.05, up 34 points from its previous close.

While several investors have sold off their positions at these levels, no one appears worried about the strength of the rally.

Mr Shailendra Bhandari, CEO of Prudential ICICI Mutul Fund, said: "I am not worried about the valuations. They are not too high. In the long run, the market definitely looks good. However, I do feel that it has run up a bit too fast. It (market) could do with a pause."

He said that unlike in the past, there are no systemic risks. "The SEBI's margining system has been excellent, there is no major operator activity and the money flows are genuine. I do not see any major cause for concern."

Foreign institutional investors (FIIs) have bought equities worth more than Rs 35,000 crore or $7.5 billion since January 2003 and Indian mutual funds have made a net investment of Rs 821 crore during the current fiscal so far.

The phenomenal flows have burgeoned the country's foreign exchange reserves to over $100 billion. Government data released over the past couple of days indicated that second quarter GDP grew at 8.4 per cent and exports grew at 14 per cent in November.

"If the economic fundamentals continue to remain strong, foreign flows will continue. Prices are attractive and FIIs will continue to buy Indian equity as long as stock valuations remain so. However, the equity market should halt and take a breather," said a fund manager who manages assets of over Rs 3,000 crore with a foreign mutual fund.

Energy, metals, FMCG and cement company stocks led today's rally. According to dealers, institutional investors were heavily buying stocks such as ONGC, GAIL India, IOC, Reliance, SAIL, Hindustan Lever, Hero Honda, Infosys, Mastek and Grasim.

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