THE BOUNCE

In current stock market rally, role of local investors provides comfort. But an economic rebound is still far

THE BSE SENSEX closed above the 30,000 mark for the first time on Wednesday with many stocks at record highs, way above their historical valuations, buoyed by capital flows and domestic investment. The surge in flows is also reflected in the rupee — one of the best performing currencies in the world, having gained over 5.5 per cent in 2017. At current levels, the Sensex is trading at close to 18 times of the next 12 month earnings, making it one of the most expensive markets in the world for equities. Such valuations would normally stoke concern among policy makers relating to the potential impact or fall-out of any subsequent slide. In the past two decades or more, bouts of euphoria have been followed by stock scams. As long as these are not hot money flows or slush funds and there is no imminent prospect of a sizeable chunk being pulled out in the near term, the regulator and the government may not be overly worried.

The surge in stocks comes at a time when the US market is also heading north with the Nasdaq Composite topping the 6000 mark on the back of Donald Trump’s tax reform proposals, and in the backdrop of the introduction of the GST. If valuations are indeed out of sync, they should correct. But in the current rally, what provides relative comfort is the role of local investors — institutional and retail. In the past, it was a one-way street, with the entry and exit of foreign portfolio investors enough to influence significantly the direction of the stock market. That’s no longer the case, as is reflected in the fact that local investors pumped in over the last three years, a net Rs 1,94,738 crore into equity schemes, way higher than the net inflow of Rs 1,52,863 crore by foreign portfolio investors in the same period. More encouraging is the fact that the retail investor base, especially for equities, is now expanding beyond the traditional top 15 cities in India and choosing to stay invested after the sharp cuts in deposit rates and other savings products.

Tempting as it may be to read the surge in stocks and the rise of the currency as a broad endorsement of the state of the economy and its management, India is still far away from an economic rebound. The bounce in the markets is positive from the point of view of raising capital for scores of Indian firms but much will depend on an investment recovery. That’s what the government should focus on. “MAAR DIYA JAAYE ya chhod diya jaaye, bol tere saath kya sulook kiya jaaye?”

It was 1971, and from every street corner blared this catchy ditty from the Raj Khosla musical blockbuster Mera Gaon Mera Desh.

In a time-honoured climactic scene, Dharmendra and Asha Parekh are tied to two (separate) pillars, and a “ghaghra choli”-clad vamp is waltzing around, belting it out. The camera stays mostly with the muscle-flexing hero and the grimacing heroine, but our attention is caught and held by the villain, slouching sexily in a corner. That guy was a strikingly handsome rookie called Vinod Khanna, who sported a dishy cleft in his chin, and stole every scene in the film.

In the word which would come into play several decades later, Vinod Khanna was hot. And he trotted, and did the things that leading men did — sang and danced, fought and romanced — with such understated suavity, and such versatility, that he speedily became one of the most popular stars in the 1970s.

In the same year ( ’71), he leapt off the screen in Gulzar’s Mere Apne, as a fiery youth who clashes with another. He faced-off with Shatrughan Sinha, who habitually chewed up every bit of scenery he could find, but Vinod Khanna stood his own: Sinha could spout dialogues, but no one was going to sigh over him. Khanna, on the other hand, was destined to be a pin-up from the time he showed up on screen.

After playing the bad guy, Khanna switched to playing the noble hero, just as