The superfast Sensex seems to be racing ahead of the market. It took just five trading sessions for it to reach 17,000 from 16,000 after the barometer index first struck 16,000 on September 19. The fastest 1,000-point surge in the widely tracked index — which hit 17,073.87 today before closing at 16,921.39 — has also raised concerns about the valuations and the selective nature of the rally.

While many will thank US Federal Reserve chairman Ben Bernanke’s rate cut for the Sensex jump and the surge in foreign investment over the last week, the euphoria has not percolated down to the market. Consider these figures. The Sensex, which has 30 top blue chip shares in its portfolio, has surged by 8 per cent during its 1,000-point plus journey in the last six sessions. On the other hand, small and medium-sized shares showed a much slower rise in the same period.

Take for example, the BSE Small-Cap Index which represents 468 small companies. This index has risen just 2.82 per cent during the last six sessions, indicating that hundreds of small companies have missed the bull run. The BSE Mid-Cap index, which represents 274 companies, fared slightly better by showing a rise of 5.7 per cent. The BSE Dollex-200 index (calculated in dollar terms) rose just 4 per cent in the same period.

The Sensex currently trades at valuations of 19.2 times of FY08 earning estimates and 16.3 times FY09 earnings estimates. “These valuations are at the upper end of the band, especially given the slowdown possibility; it clearly calls for caution at these levels,” said SG Private Banking (Asia Pacific) global market manager (Indian Sub-Continent) Balakrishnan Kunnambath. The top 10 stocks in the Sensex pack have shot up by 8-15 per cent in the last six sessions. The gain would have been much higher had some of them not reacted due to profit-taking today. Reliance Industries Ltd (RIL), the most valuable company in India in terms of market capitalisation, has risen 12.7 per cent since September 18. Reliance Energy, belonging to the Anil Ambani group, has surged 10.5 per cent in the same period. Bharti, ICICI Bank and HDFC, have zoomed 10-15 per cent.

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