Sensex @17k

A couple of weeks ago, a foreign brokerage set 17,000 points as its 12-month target for the Sensex. In simple terms, this means it expects the index to move up by a princely 1,700 points, give or take a few hundred, between now and December 2012.

Averse to looking at the black hole forward, my mind took me back to the first time the market tasted 17,000.

“No khatra, Sensex goes for satra,” was the working headline for the market report I filed on September 24, 2007, my gmail showed. It was a Monday and only three sessions earlier the Bombay Stock Exchange benchmark had crossed the 16,000-mark for the first time in history.

The intro, or the first line of the report, read: “Last of the surviving bears were smoked out and hunted down on Monday, as both Nifty and Sensex closed in on another milestone.”

I was not off the mark. That Wednesday, the headline was ‘Reaching seventeenth heaven in a flash’. It took just five sessions flat for the 1,000-point sprint from 16,000 to 17,000.

Headlines were the easy part, but every report needed body copy, which usually followed the standard inflation-interest rates-GDP growth-valuation-foreign inflows template.

In those heady days, between the Ganesh Chathurthi and Christmas, we were running out of fresh body copy. The impossible trinity of high growth, high rates and appreciating currency was explained between 16,000-17,000, decoupling theories were ripped bare for the next 1,000. We floated forward valuation theories, discounting FY09 and FY10 earnings numbers taking index to 19,000.

I don’t exactly remember, but I must have asked Sandeep Shenoy something like this. “Sir, XXX bank is looking stretched in the forward earnings, but is it not a good buy looking at the embedded value of insurance and MF businesses?”

Shenoy, then strategist with a local brokerage, was a nice guy who didn’t mince words. “Dekho Sundar, forget all these valuation theories. They don’t matter when money is coming in like this. You can’t argue with liquidity.”

Yes, liquidity is like your boss. No matter how reasonable you are, boss always wins.

Unfortunately, liquidity is on the wrong side now. Cut rates, relax rules or stand on your head. It will reverse only when it does, not because of what you do. Till then, it’s best to sit tight and keep quiet in this kolaveri market.

If you are nervous, try what my friend Jyoti is singing and was kind enough to forward. I don’t need to tell you the tune...

“Nifty Song…Flop Song
Why this Nifty always falling di? (twice)
Investeduu croresuu croresuu now getting lakhsuu,
Mom tolduu golduu golduu, I boughtuu stocksuu.
Why this Nifty always falling di?
Ok mama.…tune change
Handla shareuu..sharela falluu... eyes fulla tearuu
Happy lifeuu, market comeuu, life reverse gearuu
Nifty, Nifty oh my Nifty,you showed me bhowuu
Goduu I am crying nowuu, brokers happy howuu?
This songuu for Nifty boysuu.
We don’t have choiceuuuu.
Why this Nifty always falling di.”