BSE Sensex @ 75,000, What Next?

BROWSING through the newspapers, one sees quite a few articles and editorials talking about the BSE Sensex having touched 75,000.

- PANKAJ CHOPRA

Frankly, I found that a bit surprising.

This reminded me of a client meeting in the Middle East some years back, when the Sensex was at about 35K. As it was reaching all-time highs then, during the discussion, I mentioned that given time, the Sensex will go to 50K. The client's broad smile expressed his total disbelief in what he thought was an irresponsible statement. However, he remembered the discussion and called me when the Sensex actually reached 50K. An index is just a representative of the markets to give you an idea whether stocks are going up or down and by how much. Various indices that track different segments of the markets and/or differing coverage (30, 50, 100, 200 etc stocks) perform differently based on the universe they represent.

So the Sensex reaching a certain milestone is good. But what really matters is understanding that the underlying stocks that form the Sensex are going up and even more important is to decipher whether the stocks are going up because of speculative activity, money flow or due to some encouraging signals on fundamental performance. Let us look at money flow and fundamentals separately in an effort to determine the amount of speculative activity, if any.