What on earth have the markets been smoking lately…?

By Vivek Sharma
12 October 2007

But stock market traders across the globe have reacted as if he has handed them a lottery with only one ticket to draw from. They reckon that Ben is a jolly good fellow who will keep on giving them lollies, every time they cry after making fools of themselves in the market.

It is no longer certain that Bernanke will be in a very benevolent mood when he sits down next to consider more gifts to market traders. It seems Uncle Sam, who put Bernanke in his chair, tricked him into handing out a big lolly last time by claiming that jobs were being lost. It has now turned out that Uncle Sam was bluffing, jobs were being added at a good pace.

Credit markets have stabilised and crude oil prices remain high, which may push up inflation -- more reasons for Bernanke to be less benevolent in future. But, global markets seem to be least bothered. They still seem to believe that there will be a pack of lollies at every corner.

We in India have been among the most exuberant in recent weeks. Except for a short blip when our politicians in Delhi seemed all set to challenge each other for a face off in a general election, our stock indices have been running on steroids. And the omnipotent Ambani brothers have led the charge — and how!

Reliance Bubble?
As the Sensex moved past 18000, the Ambanis crossed another milestone - that of the richest family on earth. The combined wealth of Mukesh and Anil is now over $90 billion, more than the net worth of Walton family — promoters of Wal-Mart. Now consider this, only 53 countries had GDP of over $90 billion in 2006 as per World Bank data!

Reliance Industries, Mukesh''s flagship, is the best performing large-cap index stock anywhere in the world this year by a wide margin. The stock has been on a relentless up-move, triggered by speculation on pricing of natural gas from its KG Basin fields and expectations of fast expanding retail operations. The gas pricing has now been finalised and it is a fair deal to Reliance. High crude oil prices will ensure record refining margins at its refinery and the petrochemicals businesses are also doing very well.