Rational or irrational?

India's benchmark stock market index the S&P BSE Sensex is at a record 70,020.68 this morning. bseindia. com. On 31 October 2023, "Renowned global investor Mark Mobius has expressed his optimism and ultra-bullishness about India's growth potential, stating that the benchmark Sensex could reach the 1,00,000 milestone in the next five years." ET. Mobius could be embarrassed. The blistering pace at which it is rising, it could hit the milestone before the New Year. "Amid record-breaking run in the Indian stock markets, Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Bach...said the Indian equities are no longer vulnerable to foreign investments as mutual funds and retail investors have become major players." DH. "She said the asset under management of mutual funds in India has surged to Rs 50 lakh crore (Rs 50 trillion) from just around Rs 8 lakh crore (Rs 8 trillion) 10 years back." Mutual funds also collect money from individuals. Perhaps, Ms Bach should remember this 1996 speech by the then Chair of the US Federal Reserve Alan Greenspan, "But how do we know when irrational exuberance has unduly escalated asset values, which then become subject to unexpected and prolonged contractions as they have in Japan in the past decade? And how do we factor that assessment into monetary policy?" Investopedia. To share in the exuberance, "Foreign portfolio investors (FPIs) injected Rs 26,505 crore (Rs 265.05 billion) into the Indian equity markets in the first six trading sessions of this month on expectation of political stability after the BJP stormed to power in three major states and robust economic growth. This came following a net investment of Rs 9,000 crore (Rs 90 billion) in October." ET. Also, "Globally, the US Federal Reserve signalled potential rate cuts starting from the first quarter of next year, indicating a shift away from the high-interest rate environment." Has it? "US job growth accelerated in November while the unemployment rate fell to 3.7%, signs of underlying labor market strength that suggested financial market expectations of an interest rate cut early next year were probably immature." "Financial markets lowered their bets of a rate cut in March." Reuters. "Policymakers from fully half of the Group of 10 jurisdictions of most traded currencies are scheduled to meet in the coming days, and interest rates for 60% of the world economy will be set in a whirlwind 60-hour window." As for the US and Europe, "After starting the year with renewed vigor to aggressively ramp up borrowing costs, they're ending 2023 with more hesitation - setting the scene for what could become a prolonged standoff with investors." Mint. India's market capitalization is now over $4 trillion (BS), while the GDP in current prices was around $3.4 trillion in 2022 (World Bank). So, should we celebrate that Indians have staked their shirts on stocks? Will it have a happy ending?