Those who didn't panic made money

'Don't Panic' is the maxim from Douglas Adams's Hitchhiker's Guide to the Galaxy. It could as well be the survival mantra on Dalal
Street. Chances are that those who had the nerve to stay put in the market, when it plunged in the aftermath of the financial crisis, are richer now.

Consider this: On September 26, 2007, the sensex had for the first time gone over the 17,000 mark. Over the next seven months, it crossed several milestones to top 21,000 in early-January 2008. But within the next 10 months, it had lost nearly twothird of its value to a multiyear low of 7,700 in late October of the year. In less than a year from then, the yo-yo is back at 17,000. However, investors' wealth, measured by BSE's market capitalisation, is now Rs 6 lakh crore more than what it was when the sensex had crossed the 17,000 mark earlier.

Additionally, 20 of the 30 stocks that are represented in the sensex are at a higher level than they were in September 2007. And if one had put Rs 1 lakh in each of the those 30 elite stocks, despite the volatilities and crashes of the last two years, they would still be richer by about Rs 4 lakh, or 13%. Remember, since we are considering a period of over a year, this gain is tax free. So keeping faith in the long term power of Dalal Street does have its rewards.

While the past few months have been unusually good — sensex has more than doubled in a little over six months — the road ahead too looks relatively free of unknown financial landmines. ‘‘There are at least four reasons why we believe the Indian market will give strong returns over the longer run,'' said Ved Prakash Chaturvedi, MD, Tata Mutual Fund. ‘‘ Firstly, its strong resilience (during the financial crisis) has boosted the faith of overseas investors in our economy. Secondly , it is now clear that some of the emerging markets will outperform most others and India is among those outperformers,'' Chaturvedi said.

Two other reasons are, stronger belief in India's domestic market and a higher level of confidence in the continuity of the economic policy because of a stable government at the centre, the Tata MF chief said. In September 2007, when sensex had crossed the 17,000-level for the first time, the uncertainties of a general election were just round the corner, as were the fears of discontinuation of economic policies if the then incumbent government was sent packing in the polls.

Technically too, the markets are on a strong footing. At 17,000, the sensex has crossed an important psychological and technical level . Similarly, the nifty crossed the 5,030 level decisively.

‘‘ In all likelihood sensex will move to 17,300 and most likely to 17,500, based on futures and options data. The corresponding nifty levels are 5,200 and 5,250,'' said Amitabh Chakraborty, president-equities , Religare Capital Markets. A correction in market place thereafter could be expected, he said.