The numbers are going d-street's way. Bombay stock Exchange's Sensex breached its 26-month high of 3721 on July 14, before closing at 3686.34 on July 15, the day this magazine went to press. The first number is around 25 per cent higher than the low of 2997.87 it touched barely three months ago, on April 11. In the same period National Stock Exchange's broad-based index, S&P CNX 500 is up 32 per cent. And the BT 50, India's only free-float index, up 29.3 per cent. On BSE that's some Rs 1,87,402 crore of market value added in 55 trading days.

The finance ministry, edgy after a series of annual stockmarket scams, asked India's capital markets watchdog, Securities and Exchange Board of India to investigate whether this bull-run had speculative origins. But with SEBI Chairman G.N. Bajpai declaiming that the rally is based on fundamentals, things couldn't be better. One, there's a mini-boom of sorts on. And two, it's based on tangibles such as improved corporate performance, a good showing (to date) by the monsoon, and improved industrial growth. Indeed, the fundamentals of the economy have been healthy enough for Centre of Monitoring Indian Economy (CMIE) to up its estimates for GDP-growth in 2003-04 to 6.5 per cent.

In a trend that is at once a cause for the upturn in the stockmarkets and a fallout of that, Foreign Institutional Investors (FIIs) are back. In June, FIIs pumped in $547 million (Rs 2,581 crore) into the market; till July 14, they had invested an additional $362 million (Rs 1,695 crore). All told, between January 1 and July 14, 2003, their investments in the market is a whopping $1,605.4 million (Rs 7,566 crore); in 2001, the best year for FII investments in the market, the number was $2,671 million (Rs 12,821 crore).

One reason for that could be that emerging markets are back to being 'in' with FIIs. And at present valuations, several Indian stocks are a steal.

The quantum of investment by FIIs has led to reports about hedge funds operating in India. Although they cannot invest directly in India, they can do so through FIIs. The latter buy shares on behalf of the former and issue them contracts, termed participatory notes or P-notes. D-street buzz has it that between 40 per cent and 50 per cent of FII money coming in now can be traced back to P-notes. Since hedge funds are, by their very definition, focused on the short-term, this doesn't bode well for the Indian market. Unless, of course, the market can keep up its momentum.

Several investors believe it can. There's Rakesh Jhunjhunwala the speculator-trader who has been waiting for a bull market for the past year and half. "I am bullish, not by valuations, but by fundamentals," says Jhunjhunwala whose preferences run to PSU- and pharma stocks. Another bull from the late Harshad Mehta's era, Nemish Shah, Director, Enam Financial Services, has emerged from hibernation. Don't make a balance sheet every year, he urges investors. "Look at the long-term picture." Last year the average EPS (Earnings Per Share) for the Sensex was Rs 288. This year, Enam expects it to be Rs 330.

Jhunjhunwala and Shah may well turn out to be right: the current edition of the stock market's rally is broad-based; even mid-cap and small-cap stocks are showing signs of upward movement. Still, the scars of previous bull runs that petered out or turned out to be scam-driven remain. Arun Kejriwal, a broker on D-street is worried by the movement in penny stocks this early in the rally (in a sustained rally, this takes some time). And the buzz on the Street has it that Ketan Parekh, the bull behind the 2001 stock market scam is back. Our recommendation: things look good, but it's still a case of Caveat Emptor.

-Roshni Jayakar

Jhunjhunwala: Fundamentally bullish

The Once & Forever Bulls
Two who see good things ahead.

Both, Nemish shah and Rakesh Jhunjhunwala have always been bulls. Shah was bullish on Reliance, ACC, and L&T in the 1992 bull-run. Then, he seemed to have gone cold to the markets (even to the tech wave), although he insists that he was "fully invested" in the markets all along. Jhunjhunwala is a speculator who believes that several Indian scrips are undervalued. In February this year, he assured BT that the Indian market was on the threshold of a sustained bull run. Now, both Shah and Jhunjhunwala are out there, out-and-out bulls. Interestingly, both advocate a medium-term investing strategy. Take a tip from them: buy and hold, then.

Ketan Parekh: An encore?

Is KP back?
No one knows for sure.

To some people it is enough evidence that the bull who moved the markets in 2000 and 2001 is back. To others, it is inconclusive evidence that could well be a mere coincidence. We're referring to the increase in the prices of Ketan Parekh's favourite stocks. The HFCL, DSQ Software, and Pentamedia scrips, have all moved up marginally. That could well be the result of a secular market rally-as we mentioned even small-cap and mid-cap stocks been part of the recent revival on the bourses-although it really is much more sensational to attribute the interest in these scrips to KP's return.

Dropped Call
No, there are no easy answers to this one.

For back-seat execs caught in one of Delhi's or Mumbai's ubiquitous traffic snarls, the mobile phone provides an escape pod-away from the gridlock and into the rarefied realm of work. Now with 2.1 million subscribers in Delhi and 1.9 million in Mumbai crowding the airwaves, or the 6.2 to 8 Mhz (per operator) of spectrum available, that option is either not available or, when available, often not of a quality that facilitates seamless two-way conversations.

The problem isn't as acute in other cities, although it is but a matter of time before that happens: Last year, India added close to 6 million subscribers to the existing base of 6 million; this year, it will add another 12 million. Companies providing cellular telephony services lay the blame for the gridlock squarely at the door of the government, which they claim is dragging its feet over releasing more spectrum.

The government has said that it will release more spectrum, although that will take some time. In the meantime, it says, operators can maintain the quality of service by investing in network-upgradation. The Cellular Operators Association of India claims that with the industry's average revenue per user (ARPU) being lower than what it costs to serve a subscriber, none of the operators can do that. Besides, argue some operators, they have already done what they could and point to the fact that cell-sites are located as close as 150 metres apart in high-traffic areas as evidence to this. The man in charge of regulating India's telecommunications market, Telecom Regulatory Authority of India (TRAI) Chairman Pradip Baijal is having none of that. "I do not believe spectrum is a constraint at present," he says. "Maybe later, but not now". Basic operators who use CDMA technology to offer 'limited mobile' services claim their technology uses the spectrum more efficiently. And the calls continue to drop.

-Vandana Gombar

RE-INDEX
Is It Time To Redo The Sensex?

The sensex, its detractors claim, is slow to capture upturns and downturns. We tend to agree (which is why we have our own index). Here's why: one, it excludes small- and mid-cap stocks where most action happens; two, it is weighted in terms of market capitalisation and movements of a few heavyweight stocks can make it swing either way; and three, BSE hates making changes in it. "Index composition is reviewed on a quarterly basis," explains Dr Bandi Ram Prasad, Chief Economist, BSE. "It is a widely-tracked index and changes are made only when necessary." Last year saw two changes in the index: ICICI Bank replaced ICICI and HDFC, Reliance Petroleum; M&As made both changes imperative. With the country's largest carmaker and the country's largest cellular telephony company now listed, bse could do worse than be a little more adventurous.

-Narendra Nathan