As the benchmark Sensex crossed 20,000 points for the first time in 32 months, the Finance Ministry on Tuesday said investors are confident about the economy but the government is keeping a close eye on the situation.
The ministry also said that overwhelming capital inflows at this point of time is not a concern and there are no signs of overheating. "We all know that the Sensex is always a little bit unpredictable. (But) I am happy that for the first time after January 2008, it has crossed 20,000 (points)," Finance Minister Pranab Mukherjee said.
The index had last traded above 20,000 level on January 17, 2008. Prior to that, the index had scaled its life-time peak of 21,206.77 points on January 10, 2008. Finance Secretary Ashok Chawla said sensex crossing the 20,000 points mark reflects the confidence of investors.
He, however, added in the same breath that the government and market regulator Sebi are keeping a close tab.
"We and the Securities and Exchange Board of India (Sebi) are watching the capital markets and the idea is to see if at any stage there is any sign of overheating, which we don't find at this moment," Chawla said.
He added that massive inflow of foreign capital into the markets is not a matter of concern currently.
"There is no cause of worry or anxiety at this point of time," Chawla added. Foreign Institutional Investors (FIIs) have made net investments of $3.46 billion so far this month in equities alone.
Surge in foreign capital inflow leads to appreciation of rupee value, which hurts exports. Besides, foreign money in equity market is considered hot and is volatile in nature.
Following the surge during 2007 and early 2008, the Sensex, however, saw a period of sustained downfall, in line with the global economic recession. It had plunged to near 8,000 points level in October 2008.
However, the markets started recovering by March 2009 and a sharp rally has been recorded over the past couple of weeks during when the sensex gained close to 2,000 points.
It scaled a high of 20,088.96 points within minutes of the market opening this morning, but lost some of the gains later to end the day at 20,001.55 points, up 95.45 points or 0.48 per cent over Monday's close.
