Mukesh Ambani, news agencies reported on Monday, is now the richest man in the world with a personal net worth of $63.2 billion. That puts h...
Mukesh Ambani, news agencies reported on Monday, is now the richest man in the world with a personal net worth of $63.2 billion. That puts him ahead of Bill Gates, legendary investor Warren Buffet, Mexican telecom tycoon Carlos Slim and steel pasha L N Mittal. According to agencies, if the wealth of both Mukesh and Anil Ambani are added, it will make them the richest family in the world with over $100 billion between the two.
Those who’d predicted this day a year ago were dismissed as overly optimistic, if not downright crazy. Today, they can pass themselves are visionaries.
On Feb 7, 2006, the BSE sensex touched 10,000 for the first time. On Monday, a year and nearly nine months later, the index breached 20,000 before closing a little below the magic number. In the interim, Indian investors earned a little over Rs 5,700 crore a day. In 631 days, the BSE’s market capitalisation has grown by an unbelievable Rs 36 lakh crore. In dollar terms, Indian markets have added close to a trillion dollars.
Paradoxically, these unheard-of levels in wealth creation came about because people outside the country became interested in it. Since 1993, when foreign institutional investors (FIIs) were first allowed to buy Indian shares, they have pumped in a total of $66.2 billion. Of this, $25 billion, or more than a third of the amount, has come in since February 2006.
Which raises the question: why did foreign fund managers bet so big on India? A combination of factors, say market players. India’s economy is more dependent on its domestic population than many others in the world that
look outside for sustenance. India’s exports are growing at a pace that is among the fastest anywhere. The country now boasts a clutch of companies that clearly comprises world-beaters — better still, all of these companies have consistently outperformed expectations on growth in sales and profits.
All of these variables opened the floodgates to attract top dollar. In turn, it led to a country with bloated forex reserves. Because so much of the dollar started to reside in India, it now takes fewer rupees to buy dollars. Which means the rupee is a stronger currency than it ever used to be. Investors like countries where the currency is strong, and they’ve been coming here in bigger droves.
It isn’t that Indian stocks look cheap at current levels. But when bullish global investors compare India to markets like China and Brazil, Indian equity doesn’t look as expensive. Makes sense, they argue, to buy some more of India. Monday’s 735-point rally that took the sensex to an all-time high of 20,025 in intra-day trade is part of the juggernaut started by bulls on Dalal Street over four years ago.
But caution ought to be sounded. There are some indicators the market may be reaching a peak. In the past six trading sessions, the sensex has gained 2,850 points (16.6%). That’s added Rs 8 lakh crore to BSE’s market cap. In the process, it has also created India’s first company with a market capitalisation of $100 billion: Reliance Industries. But FIIs are not as active as they used to be. SEBI data showed during the period, they also took out $600 million. To get a sense of how the market will behave in the immediate future, investors will take a close look at RBI’s new credit policy to be unveiled on Tuesday. “However,’’ says Sanjay Sinha, chief investment officer, SBI Mutual Fund, “investors believe the RBI will not change any of the key policy rates. The US Fed, scheduled to meet on Tuesday and Wednesday, will cut the key interest rate by quarter of a percentage point.’’
That, marketmen say, could increase volatility in the short term and investors should prepare to live through it. “If you are prepared to accept that this is not a cheap market, then you should be prepared for volatility in the shorter term and stay invested,’’ said Abhay Aima, group head, HDFC Bank. So if there’s some correction tomorrow, or the day after, just stay put with your stocks and do not rush to liquidate. “The India story will continue for the next five to ten years.’’
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