When the Sensitive Index of the Bombay Stock Exchange (BSE) welcomed 1999 by shooting up by over 600 points, it was as if 1998's pent-up sizzle had finally found a way out. As Coopers & Lybrand executive director Sharat Bansal says, The Indian stockmarkets might well have skipped 1998.
The reasons were all there. With Congress refusing to form the government, mid-term elections seemed distant. Mandates like infrastructure development, share buyback and dematerialisation of shares appeared to be on track. Third-quarter results were largely encouraging. And many foreign funds were to get their fund allotments for emerging markets only in January. So, even as the foreign institutional investors (FIIS) were on their annual vacation, the bulls at home decided that enough was, well, enough.
As a result, the Sensexwhich closed at 2963 on December 24touched 3515 on January 11, a gain of over 550 points in 14 working days. On January 8, volumes on the BSE and the National Stock Exchange (NSE) had reached Rs 4,830 crore. On January 11, the volume zoomed to over Rs 5,400 crore.
Says Parag Parekh, a Mumbai-based broker: Typical teji rumours and tips are flying thick and fast, and everybody in the market seems to have become an expert with tips to offer. The entire rally seems to be based on the 'greater fool' theory. Most people agree that a rally is unwarranted at this stage, but there are more people buying stocks at a high price in the hope that a greater fool will buy them tomorrow at even higher prices. At such times, it is necessary for investors to exercise utmost discipline, not feel left out of the rally and not run after every stock in the hope of making a fast buck. It is important to stick with the right stocks with proven fundamentals and better-than-average growth prospects.
As if on cue, the slide began on January 12, with the Sensex losing...