Nine months ago, it was a cautious market reacting to a Sensex 14,000 on January 3, 2007. But despite the caution the market expressed then (experts said don’t expect it to rise more than 15 per cent during the year), the Sensex has already risen 30 per cent. The same experts are now touting the 20,000 mark as touchable. I believe they need to be more confident about their forecasts than flitting around with volatility. The market has been mercilessly optimistic, reflecting the underlying companies that are ruthlessly cheerful. Moving towards a climax that’s still many years ahead.

Riding a relentless rise in profits that have grown by 24-36 per cent per annum for most of the past 20 quarters between 2003 and 2007, the Sensex during the period has not grown but jumped 3.8 times, from 4,768.90 on October 10, 2003 to 18,000 on October 10, 2007. That implies an annual compounded growth rate of 40 per cent. All through, investors have been largely divided between euphoria and caution. The euphoric believe this 40 per cent rate will continue, and like it or not, they’ve been proved right so far. The cautious believe this growth will stop any time and we will witness the biggest-ever crash; the market has ignored them.

And why not? The new big picture of the Indian economy is strong and fast growing. It is not only a productivity-led growth but is also based on structural changes. It’s like speeding on a newly constructed national highway at over 120 km per hour. At that speed, you don’t look at the rear view mirror to see what you’ve left behind, it’s dangerous; you only look ahead. The companies underlying the Sensex are doing precisely that. They are simultaneously reflecting and building on the India growth story, paving the way forward for other companies to follow, driving and profiting from new opportunities that have come their way as a sleeping giant gets unshackled.

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