Riding piggyback on India Inc's growth story, Foreign Institutional Investors made huge portfolio investments into the country even as domestic mutual funds joined the bandwagon despite a caution sounded by some leading foreign investment gurus and analysts.
FIIs pumped in an enormous $8.34 billion, while mutual funds chipped in about Rs 13,300 crore (Rs 133 billion) in the calendar year.
Besides GDP growth and increase in corporate earnings, the sustained upward spiral could be attributed to a sharp fall in global crude oil prices to around $60 a barrel after hitting an all-time of $78.40 in mid-July.
Power and cement sector shares outperformed all other sectors following encouraging proposals for capital goods sector in the Union Budget presented in February. Real estate and infrastructure shares too were in the limelight.
However, it was not a smooth ride for markets in the calendar year as a global gloom during May-June had a cascading impact on Indian bourses.
The trouble started on May 18, when the Sensex tumbled by 826.38 points, the biggest single session fall, leading to a huge plunge of 3,872.10 points or 30.56 per cent from an all-time high of 12,671.11 on May 11 to 8,799.01 on June 14.
The situation turned worse on May 22, the day the BSE and the NSE were forced to suspend trading for one hour after the key indices touched ten per cent lower circuit for the second time in the history.
During this period, factors such as negative global trend, high interest rates, geopolitical tension in the middle-east and slowdown in US economy played spoilsport.
The Reserve Bank of India's CRR hike in December also played havoc on the bourses, pulling it down to 12,801.65 on December 12 from all-time peak of 14,035.30 on December 6, a net fall of 1,233.65 points in just three days.
The markets witnessed high level of volatility on several times ending with huge gains or falls, raising fears of margin calls on two occasions, in May as well as in December.
The markets continued upward march after mid-June on the back of buoyant trend in emerging markets among other factors including growing interest among Indian companies to acquire overseas entities.
Market leader Reliance Industries remained the star performer in the calendar year, even after the split in the Reliance group of companies.
The 2006 has been one of the best years for the stock markets as indices registered across-the-board gains. The capital goods, IT, metal, bank and technology sectors scored impressive advances. And given by current sentiments and the bullish outlook, 2007 also looks set to be a great year for the capital markets.
PTI