The Hindu Business Line : 12,000 and still counting

While fund managers are rubbing their eyes in disbelief at the pace with which the Sensex conquered the last 1,000 points, the days to come promise to be even better. "Sensex breaching the 12,000-mark has come faster than expected, but we are in a virtuous cycle and with liquidity fuelling the market, the prospects are not going to change overnight," said Mr Sandesh Kirkire, Chief Executive Officer, Kotak Mahindra Asset Management Company.

The latest rally in the bourses has special significance for mutual funds as they have been fuelling it.

Earlier, foreign institutional investors largely set the trend at the markets, but now mutual funds, whose new fund offers have grown in magnitude, are significant contributors.

Stock markets have taken all the good news enthusiastically and ignored the bad. Even with the international oil prices surging to the $75 mark, Indian markets have not paused to take notice. "Caution is warranted at this point, though caution does not mean bearishness," says Mr Mihir Vora, Head of Equities, ABN Amro Mutual Fund.

Confident bull-run

The confidence in the current bull run hinges on the fact that upward movement in stock prices is not skewed to a few sectors or scrips unlike in the last two bull runs in the Indian bourses, according to fund managers. There are some areas of concern now, such as stocks in the oil and gas sector (that have not absorbed the rising oil prices) and in derivatives positions. "Outstanding positions in futures and options are running at high levels.

Thursday's data indicates this to be Rs 50,000 crore," Mr Vora said.

Ever since the Sensex touched 7000, analysts have been saying that even though some stocks are expensive, valuations are not too stretched.

Even at 12,000, this view holds good.

Looking forward, better-than-expected corporate results, continued liquidity, rise in commodity prices (thereby buoyancy in commodity stocks) and higher domestic spending, all spell good news for the market. In fact, even `correction' is a good word now.