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MARKETS rallied on Wednesday with the BSE Sensex closing above 14,000 levels, the fourth time this month, shrugging off concerns over rising crude prices and a slower-than-expected recovery in the US.
Investors were emboldened by the bullish mood prevailing in Asian markets, with key indices rising between 3% and 5%. Real estate, banking and metal shares were the big gainers as the bellwether Sensex closed at 14,109.64, up 520.41 points over the previous day. The 50-share Nifty climbed 159.35 points to close at 4,276.05. "Investors are betting on a re-rating of stocks because of a likely improvement in balance sheets, now that companies are once again able to raise capital," said Alroy Lobo, chief strategist, Kotak Mahindra Asset Management.
"We are not seeing a re-rating based on earnings yet. Earnings growth this year is likely to be flat, it will pick up next (financial) year," he said.
Both foreign and domestic institutions were heavy buyers on Wednesday. According to provisional data, overseas investors net bought Rs 370 crore, while domestic mutual funds pumped in Rs 685 crore at the net level.
"Risk appetite (globally) is returning among investors because of better sentiment on financial stocks; investors are beginning to unwind bearish positions," says Anthony Hung, managing director and head of Merrill Lynch's Asia Pacific Wealth Management operations.
"We expect a W-shaped recovery in Asia, with the recent rally marking the upward prong of the middle of the W," he added. Crude in tune with stocks
BUT crude prices are keeping pace with rising equity prices, something that could worry stock market bulls. Crude hit a six-month high of over $63 a barrel, on a statement by the Saudi Arabian oil minister that there were signs of a demand pick up in Asia.
And economic data from the US remains mixed. The National Association for Business Economics survey indicated the US recovery will be weaker than previously estimated, a day after the Conference Board's sentiment index showed that confidence among US consumers is improving.
European markets were mixed at the time of going to press, with gainers struggling to retain their lead.
Back home, secondline shares recouped the previous session's losses, with the BSE Midcap and Smallcap indices gaining 3-4%. These stocks have logged eye-popping gains in the last couple of weeks, as fund managers booked profits in frontline shares and redeployed the money in second tier stocks, which are perceived to be available at better valuations.
Although some market watchers fear a bubble is again building up in mid-cap stocks, a Citigroup Global Markets not sough to allay such fears.
"Interestingly, the broader market is doing better than bigger companies, with 294-500 companies recording 8% growth in sales and earnings (in Q4 FY09). This could suggest medium sized businesses have not been hurt as much as the larger ones (big companies did better on way up), challenging 'conventional wisdom' that mid-cap businesses are more vulnerable and therefore should be valued lower too," it said.
Investors were emboldened by the bullish mood prevailing in Asian markets, with key indices rising between 3% and 5%. Real estate, banking and metal shares were the big gainers as the bellwether Sensex closed at 14,109.64, up 520.41 points over the previous day. The 50-share Nifty climbed 159.35 points to close at 4,276.05. "Investors are betting on a re-rating of stocks because of a likely improvement in balance sheets, now that companies are once again able to raise capital," said Alroy Lobo, chief strategist, Kotak Mahindra Asset Management.
"We are not seeing a re-rating based on earnings yet. Earnings growth this year is likely to be flat, it will pick up next (financial) year," he said.
Both foreign and domestic institutions were heavy buyers on Wednesday. According to provisional data, overseas investors net bought Rs 370 crore, while domestic mutual funds pumped in Rs 685 crore at the net level.
"Risk appetite (globally) is returning among investors because of better sentiment on financial stocks; investors are beginning to unwind bearish positions," says Anthony Hung, managing director and head of Merrill Lynch's Asia Pacific Wealth Management operations.
"We expect a W-shaped recovery in Asia, with the recent rally marking the upward prong of the middle of the W," he added. Crude in tune with stocks
BUT crude prices are keeping pace with rising equity prices, something that could worry stock market bulls. Crude hit a six-month high of over $63 a barrel, on a statement by the Saudi Arabian oil minister that there were signs of a demand pick up in Asia.
And economic data from the US remains mixed. The National Association for Business Economics survey indicated the US recovery will be weaker than previously estimated, a day after the Conference Board's sentiment index showed that confidence among US consumers is improving.
European markets were mixed at the time of going to press, with gainers struggling to retain their lead.
Back home, secondline shares recouped the previous session's losses, with the BSE Midcap and Smallcap indices gaining 3-4%. These stocks have logged eye-popping gains in the last couple of weeks, as fund managers booked profits in frontline shares and redeployed the money in second tier stocks, which are perceived to be available at better valuations.
Although some market watchers fear a bubble is again building up in mid-cap stocks, a Citigroup Global Markets not sough to allay such fears.
"Interestingly, the broader market is doing better than bigger companies, with 294-500 companies recording 8% growth in sales and earnings (in Q4 FY09). This could suggest medium sized businesses have not been hurt as much as the larger ones (big companies did better on way up), challenging 'conventional wisdom' that mid-cap businesses are more vulnerable and therefore should be valued lower too," it said.
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