•  BSE Sensex Reaches the 10,000 Mark For the First Time
•  Foreign Institutional Investors Continue to Invest in Indian Equities
•  Budget Historically Has an Impact on the Market; Can History Be the Guide This Time?

The Sensex beyond 10,000 mark:

Sensex, the benchmark index of The Stock Exchange, Mumbai is now a five-digit index, having crossed the 10,000 mark on Monay, February 06, 2006. The index representing 30 blue chip stocks, has sustained the rise and kept above 10,000 for the rest of the week.

The continuing rise of the Indian stock market has defied the prediction of many analysts. The Hindu Business Line newspaper, in its Feb. 5 editorial, said "If wishes were horses, then the Sensex would have crossed the 10,000 point mark last week (of January)." The index crossed the mark the very next day.

Every time it reached near the much-hyped level, the selling pressure forced the benchmark index to retrace off the highs. At the same time, investor purchases during every dip in the market, saw a subsequent rise again.

Sensex Milestones:

More Than 5% Gain in the First Month of the Year:

In the month of January, the Sensex registered a gain of 522 points or 5.5% from 9398 to 9920. The beginning of the month, however, was not very positive as the Sensex dipped 8 times compared to 4 days of gain between January 1st and January 18th. The new upswing came on January 19 with a rise of 212 points from 9238 to 9450. The first few days of February witnessed some selling pressure, as the Sensex faced a tough psychological resistance even at the level of 9950. It failed to cross the barrier by 5 points on January 30, and by 10 points on January 31. In the beginning of February, Sensex missed the level of 10,000 only by 6 points on Wednesday February 01 before finally closing in red. It took three days of selling before Sensex actually crossed the 10,000 mark on Monday, February 06, 2006.

Foreign Institutional Investors Vs Domestic Funds: What a Check and Balance!

In January, foreign institutional investors (FIIs) made a net investment of $805.10 million (Rs 3,677.60 crore), while the domestic mutual funds were net sellers of $XYZ million (Rs 1,172.29 crore), according to the market regulator, the Securities and Exchange Board of India (SEBI). It is interesting to note that FIIs and domestic funds are now playing to each other's moves. FIIs continue to buy even at higher levels as they have collected billions of dollars overseas through India-specific funds for investing in the Indian equities. The domestic funds have been a bit more cautious. Indian funds also have to look for fresh investments, as they collected more than $2.25 billion (Rs. 10,000 crore) in the month of January alone through their new fund offers (NFOs). Analysts are therefore calling India's stock market, a liquidity-driven market.

The Rise in the Sensex Rides the 8% Growth in the Indian Economy:

India-specific funds are sold on the basis of the "India-story" - the fast-expanding Indian economy. The Reserve Bank of India (RBI), the central bank of the country, has raised the growth rate estimate to 7.5%-8.0% from the range of 7.0%-7.5%. The Gross Domestic Product (GDP) growth rate registered in the April-September 2005 period was 8.1%. Prime Minister Dr. Manmohan Singh has recently stated that India could achieve an 8%-10% growth on strong demand, if it succeeds in increasing the savings rate by another 4 percentage points from the current record level of 29%. "Once that happens, 10% growth rate is a distinct possibility," the Prime Minister said in a recent press conference.

The Pre-Budget & Post-Budget Impact:

The budget impact on the market will be the most crucial factor to be watched in the months of February and March. Historically, the Indian market has gone up in the month of February ahead of the general budget (11 out of last 15 years), while it witnessed a decline in the month of March after the budget (12 out of last 15 years). History, however, might not be a perfect guide this time, as the Indian market has transformed in the last one year.

BSE Sensex 01/31/06 9,919.89 70.86 01/30/06 9,849.03 -21.76 01/27/06 9,870.79 185.05 01/25/06 9,685.74 135.82 01/24/06 9,549.92 85.02 01/23/06 9,464.90 -56.06 01/20/06 9,520.96 71.12 01/19/06 9,449.84 212.31 01/18/06 9,237.53 -76.6 01/17/06 9,314.13 2.94 01/16/06 9,311.19 -63 01/13/06 9,374.19 -6.69 01/12/06 9,380.88 -64.42 01/10/06 9,445.30 -138.15 01/09/06 9,583.45 -56.84 01/06/06 9,640.29 22.55 01/05/06 9,617.74 -30.34 01/04/06 9,648.08 108.71 01/03/06 9,539.37 149.23 01/02/06 9,390.14 -7.79 12/30/05 9,397.93 74.68