Market rally: Investors richer by Rs 10 lakh crore in 7 weeks

FIIs have pumped in Rs 16,422 crore since December 20 last year

A sharp rally in the stock market in the past one and a half months has turned investors richer by Rs 10 lakh crore.

The total investor wealth, measured in terms of cumulative market capitalisation of all listed companies, rose to Rs 62,72,757 crore, up by Rs 10,11,392 crore from its recent low touched in December.

Strong inflows from foreign investors, RBI’s surprise 50-basis-point cut in the cash reserve ratio (CRR), moderating inflation and better-than-expected index of industrial production (IIP) data have helped the market to rebound sharply.

The Bombay Stock Exchange (BSE) benchmark Sensex, which closed on Monday at 17,707, has gained 16.7 per cent or 2,532 points from its recent low of 15,175 touched on December 20, 2011.

As many as 28 stocks, including JSW Holdings, STC India, Hindustan Copper, IVRCL, IVRCL Assets and Holdings and KSK Energy Ventures, have doubled from their December-20 levels. About 240 stocks appreciated 50-99 per cent each and 806 gained 25-50 per cent each during the period. Foreign institutional investors (FIIs) pumped in Rs 16,422 crore ($3.27 billion) from December 20 to February 6 in the stock markets, Securities and Exchange Board of India (Sebi) data showed.

“The markets have risen in January sharply, as significant FII money has flowed in after the release of funds by the European Central Bank. We also had no significant global negatives and in India, the IIP and inflation data were positive. The cut in the CRR also helped,” said Dipen Shah, head, fundamental research, Kotak Securities. “We believe more reforms and action on the fiscal deficit front is needed for the markets to sustain and move up from current levels on a sustainable basis. Additional fund flows may take the markets higher in the short term, though,” he added.

“Domestically, the undertone is still pretty upbeat, due to strong inflow of overseas capital into Indian financial assets over the past one month or so. Hopes are also building on material improvement in governance and policy making,” says Amar Ambani, head of research, IIFL.

Banking was the best performing sector and added Rs 1,50,000 crore in total m-cap of the BSE. Refineries, power and trading sector saw m-cap rising between Rs 50,000 and Rs 75,000 crore each. Mining, metal, telecommunication, engineering, information technology, automobiles and pharmaceuticals companies reported value appreciation between Rs 25,000 and Rs 50,000 crore each.

“Going by technical and historical indicators, it’s likely to persist if pre-Budget rumours are positive. If you enter the rally at these levels, be prepared to reverse and go “double-minus" on B-day and after,” said Delhi-based analyst Devangshu Datta.