Investors are preparing to uncork the champagne to celebrate the Sensex hitting the 50000 mark. The BSE index on Wednesday ended just 208 points short of the magical mark at 49792.12

The market bellwether has catapulted more than 1200 points in the past two trading sessions propelled by abundant liquidity and a stream of strong third quarter numbers along with expectations of growth boosters in the budget which is less than a fortnight away.

However, analysts have predicted a possible “correction” that has created great anxiety beneath the joyful veneer. A correction occurs when prices fall 10 per cent from their recent highs.

But for now the market is all agog about the Sensex jetting past the 50000-mark egged on by a growth oriented budget and strong portfolio inflows. Provisional data showed FPIs purchasing nearly Rs 2,300 crore of stocks on Wednesday.

“The benchmark index may hit 50000 during the next couple of trading sessions. Whether it will sustain at that level, is anybody’s guess,” an analyst with a brokerage said.

On Wednesday, Kumar Mangalam Birla, chairman of the Aditya Birla group, wrote in LinkedIn that there was an open question over how much “froth” is there in the markets and that it would need another quarter or so to confirm whether this booming trajectory was here to stay or not.

Reserve Bank of India (RBI) governor Shaktikanta Das had also warned that the disconnect between stocks and the Indian economy could cause a correction, though this has yet to take place.

“The rally in stock markets, which is global, has been triggered by the massive liquidity injection by the central banks leading to historically low-interest rates, a response to the severe recession caused by the pandemic,” V.K. Vijayakumar, chief investment strategist at Geojit Financial Services, said.

“But now valuations are moving to risky levels which are hard to justify. It’s difficult to predict a crash or its timing. But at high valuations, markets are vulnerable to corrections,’’ he said.

The benchmark indices on Wednesday soared to lifetime highs mirroring the global markets which rose ahead of US President-elect Joe Biden’s inauguration ceremony amid expectations of fresh stimulus by the new administration. Such a stimulus is expected to increase the flow of foreign funds into the emerging markets such as India.

Rallying for the third straight day, the 30-share BSE Sensex advanced 393.83 points or 0.80 per cent to close at a new high of 49792.12.

During intra-day trades, the Sensex touched a high of 49874.42, falling short of 50000 by only 125.58 points. Similarly, the Nifty jumped 123.55 points or 0.85 per cent to settle at a lifetime high of 14644.70.

Birla view

Terming volatility as a “froth”, Aditya Birla group chairman Kumar Mangalam Birla said that it along with uncertainty have been an underlying phenomenon for almost two decades now and financial variables have become even more volatile in these unusual times.

Stating that after the outbreak though there were prophets of doom predicting irreversible shifts in consumer demand and the evisceration of sectors, but there has been recovery across sectors.
He also presented a contrarian view to the notion that work from home will be the “mega trend”
saying office is not just a place where people come to work but is a melting pot — of people, ideas, and conversations.

In India too, he said that the initial prognosis and narrative of experts proved to be excessively pessimistic but the country has witnessed strong recovery across manufacturing sectors, cement to paints, and automotive to aluminium.

Several indicators for India, including GST collections, electricity demand, railway freight movement, and passenger vehicle sales have reverted to positive growth numbers in recent months.

Reflecting on the year gone by, he said the coronavirus pandemic has brought devastation and asked people and companies not to "ignore the comorbidities -- whether in life or business", while asking them to build reserves of knowledge, ideas, collaboration and goodwill to emerge stronger from crisis.

He also presented a contrarian view to the notion that work from home will be the ''mega trend'' of the decade saying office is not just a place where people come to work but is a melting pot—of people, ideas, and conversations.