Sensex hits a sixer, but let's wait for a correction

Sanvat 2061 started with a bang, with the Sensex doing what Indian cricketers have failed to do in a long time, hit a 6! After touching 6,002, on Diwali Muharat trading day, the Sensex fell back to end the week at 5,964, for a weekly gain of 73 points. The upmove is driven by both domestic and foreign investment as the Indian corporate sector comes out with stunning results.
Over 240 companies have more than doubled post-tax profits in the second quarter of the year, an incredible performance.
Of these, 36 managed despite a drop in sales.Not only is the secondary market doing well, so is the primary, IPO, market, which had been comatose for many years. Preparing for Basel II, several banks are planning IPOs; one of the largest ones would be from PNB, of Rs 1,250 crore in January, which ought to be worth looking at.
Infosys announced a sponsored ADS issue of 16 million shares, equivalent to 5.9 per cent of its capital. Its first ADS offered 7.9 per cent of capital and the ADS quote at a premium of over 50 per cent to domestic prices. The proposed ADS will help reduce the premium and thus benefit domestic holders who, after the issue would hold some 45 per cent of equity.
The stock price of HDFC Bank has shot up 17 per cent since it announced an ADR issue, helping drive the group m-cap to Rs 30,700 crore, past that of the SBI group (Rs 28,100 crore) and ICICI Bank (Rs 23,200 crore).
One wonders why Indian stockmarkets, the 130-year-old BSE and the modern NSE, cannot go and market themselves to attract foreign companies to list on them, just as Nasdaq is doing for the best companies from India and elsewhere. Both exchanges boast of lower transaction costs, efficient settlement systems, good risk management and effective supervision. With a transfer of wealth eastwards, they are ideally positioned to open closer to the waking hours of Japan, HK and China than their sleeping hours, when Nasdaq opens. Is it just a lack of imagination, or chutzpah? Whilst the corporate backbone is strong, the government’s isn’t!
Under pressure from the Left, it is contemplating a rollback of its move to hike LPG cylinder prices by Rs 5 per month until the subsidy on it vanishes, perhaps in 3 years time.
Though there still seems a little steam left in the rally it may be prudent to wait for a correction.