Share markets to remain robust in 2007

A majority of India’s CEOs, merchant bankers and fund managers, expect the share markets to remain robust in 2007 as it was in 2006, an ASSOCHAM Business Barometer (ABB) has said.

As many as 72 per cent of the CEOs, merchant bankers and fund managers polled by the survey felt that though the market might witness gyrations of higher proportions, the underlying strength of the market plays would remain intact. This is because the economic fundamentals like GDP growth including industry production and the performance of key infrastructure sectors like manufacturing, trade & communication and financial services will continue to be better as these have accounted for the growth of more than 11.6 per cent, 13.5 per cent and 9.2 per cent in first half of the financial year 2006-07. Construction and electricity are likely to keep their pace in the next year as well.

Over 78 per cent of those polled did not however hazard a guess as to where sensex would be in 2007. But they remain sure about the long-term prospects of the Indian growth story.

About 66 per cent of the ABB respondents felt that the foreign institution investor would continue to pour funds into the emerging markets in 2007 with Indian staying among the top choices of the overseas portfolio managers. They expected the mutual funds also to remain as buoyant in the next calendar year as they were in 2006.

The mutual funds invested a total of Rs. 15,303 crore in equity and debt during the calendar year 2006. The amount invested by the mutual funds in equity out shown the debt by Rs. 12, 212 crore, as investment amounting to Rs. 13,758 crore was inducted in equity funds as compared to Rs. 1,545 crore in equity. The mutual fund investment in each month increased by average 70 per cent during the year 2006 as compared to more than 100 per cent in year 2005. The increase in the total number of mutual funds schemes during this year was 115.

The total amount invested by foreign institutional investors during the year 2006 was Rs. 42, 275 crore as compared to Rs. 41,663 crore in year 2005, recording the marginal decline of 1.4 per cent. The average amount invested by FIIs each month in 2006 was Rs. 3500 crore as compared to Rs. 3471 crore in 2005.The purchases by FIIs amounted to Rs. 39104.7 crore and sale was Rs. 3170.8 crore in 2006 as compared to purchases of Rs.175442 crore and sale of Rs. 2372 crore in 2005.

Sensex, the 30 companies based Bombay Stock Exchange indicator, increased by 44 per cent and Nifty, 50 companies based national Stock Exchange indicator increased by 37 per cent, from 2nd January to 15 December, indicative of the overall robust health of the stock markets. Sensex closed at 9390.14 on 2nd January and reached the level of 13614.52 on 15 December, whereas, Nifty was at 2835.95 on first trading day of the year 2006 and closed at 3888.65 on 15 December 2006.

However a sizable 48 per cent of the ABB respondents said that the economy is showing initial signs of overheating and inflation would continue to stay as a trouble spot as long as the supply side constraints, especially essential commodities were not removed.

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