Coal India, Fed herald Diwali; Sensex ends at all-time high
04 Nov 2010
It was a real Diwali celebration for the markets, supported and lightened up by strong global cues post the FOMC announcement, foreign inflow and successful listing of India's largest producing company Coal India.
Bulls were completely in a party mood and were pushing the markets towards all-time highs - back to the 2008 level. The 30-share BSE Sensex closed at an all-time high of 20893.57 as against its earlier closing high of 20873.33 that it hit on January 8, 2008. The rally was purely led by heavyweights - especially financial and oil & gas exploration companies' shares.
Experts' astrology backed by strong liquidity came true as everyone was expecting the markets at all-time high by Diwali. Quantitive easing part 2 announced by Federal Open Market Committee (FOMC) on Wednesday played a very important role today, which fueled the rally across the globe; it was followed by huge funds blocked in Coal India, which got released in last two days.
Yesterday evening the Federal Reserve launched a fresh effort to support a struggling US economy, announcing a plan to infuse USD 600 billion into the economy through government bonds despite concerns that this measure could do more harm than good. Experts believe that FED will purchase at a pace of about USD 75 billion per month or about.
Mark Mobius, Managing Director at Templeton Asset Management said the quantum of Feds quantitative easing measures was in line with expectations. However, he said, it was difficult to assess the impact of QE2 on the overall economy.
This measure would see money flow out into other countries as well, mainly emerging markets as most EMs are in the midst of a bull market. Mobius fears that emerging market would now face a significant challenge managing inflation.
