Sensex: A cocaine addict?

When the Sensex surpassed 22,000 points without any warning or effort, newspapers termed it as a “new high” which sounded like our stock market was an irresponsible cocaine addict. Even the Mama and Mami’s of Mylapore (gold addicts) who proposed black-money in-flow theory and linked it to Rupee devaluation in September 2013 like shrewd economists and couldn’t put forward a theory now.

Is our stock market keeping up with the rising temperature? Or is it NaMo wave extending to our markets? I joined the same wagon with the Mylapore gang looking for answers. Are our economic fundamentals strong enough for such a rally? Who are the FIIs investing in our markets? Are they benamis of our corrupt politicians?

1. GDP growth hasn't improved or has been revised upward (5.5 projected for 2014-15 vs 4.5% recorded in 2013-14, lowest GDP growth in a decade)
2. Manufacturing index doesn’t seem to support the rally either. The HSBC manufacturing purchasing managers’ index (PMI), which gauges business activity in Indian factories but not its utilities, fell to 51.3 in March.
3. Car sales continue to be tepid. Maruti reported a 5.5% decline in March Sales compared to same time last year and Ford has recalled it Figo and Fiesta models in India. Union issues plaguing both Toyota and Maruti have slowed down our exports, thereby growing our fiscal deficit.
4. India’s debt hasn't diminished nor our credit rating has improved
5. There is no change in our foreign policy towards even our most friendly neighbors (China, Pakistan, Bangladesh or Srilanka).
6. There has been no change in our FDI policy or in our stand in bringing back black money
7. RBI has left the interest rate untouched, despite fluctuation in international gold rate
8. Nothing has changed in the last year for FDIs to suddenly feel favorable towards India. We are not in a political turmoil, but still we aren't sure if the next Government will have absolute majority in the upcoming elections.

Given the above reasons, how can one explain the surging stock market indices?