Wednesday, January 9, 2008

The elephant and the bull market

At the epicenter of India's booming stock market, on Mumbai's Dalal Street, there's hardly any sign of frenzy. A few dozen people stand outside, laconically watching the electronic ticker. Several murmur into phones behind cupped hands, as vegetarian-snack vendors sell samosas and sub-brokers hand out company prospectuses.

Inside, the Bombay Stock Exchange's once-rambunctious trading floor has long since closed. Now brokers place orders quietly and electronically from elsewhere.

But the calm belies what's really going on - an unprecedented run-up in stock prices fed by foreign-investor enthusiasm about India's economic growth, averaging 9% over the past three years. In the past three months more than $7.9 billion in foreign equity capital has flooded in, pushing the market up such a steep curve that the key Sensex index gained some 3,000 points, or 17.5%, in just 33 days this fall.

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