The article talks about the tough choices equity investors face in the coming one year or so. It also provides some insights in to the possible alternate investment options like govt securities, debt investments etc.
Most panelists in the “Equity Outlook – 2009”, organized by ET, were of viewpoint that stock market in India would be range-bound in the coming year and would stay around 8k-8.5k till the end 2009. The recovery is expected in the beginning of 2010. Also India is expected to recover faster then the western countries. However, this recovery is expected to be preceded by much greater slump of around 20-30%. In this scenario, it is difficult for equity investors to decide whether to stay invested and wait for recovery or remove investments and invest instead into debt instruments, bank deposits or MFs. If they stay invested they would miss the initial rally but surely gain on a longer term. However, the short term risks in this case are really high.
Bank deposits are giving decent returns of 8% presently and debt instruments would give even more if interest rates decline further. With inflation expected to be further down, there would be significant increase in the yield. This would partly make for the initial rally missed by the equity investors. Although there is no prediction for the small-cap and mid-cap companies, a prudent mix of such companies along with large-cap in the portfolio would make up for the loss of initial rally.
The article comments on the recent CSO (Central Statistical Organization) estimates regarding the macro-economic forecasts for the present year.
CSO has recently given the estimate of the GDP growth for the current fiscal to be 7.1%. This is exactly in line with the RBI (7%) and PM’s Economic Advisory Council (7.1%) estimates. This certainly reassures that the GDP growth for this fiscal would not go below 7%. However, less assuring is the examination of disaggregated numbers. Forecast of agricultural growth (2.6% from 4.9% last fiscal) and industrial growth (4.1% from 8.2% last fiscal) adds a lot to the human distress. Effect of slowdown is also expected in the services sector (6.5% from 10.1% last fiscal). However, “community, social and personal services” are expected to see dramatic increase (9.3% from 6.8% last fiscal) but on account of Sixth Pay Commission and NREGS payouts.
However, there is a little silver lining for gross fixed capital formation (32.1% from 31.6% last fiscal). Although marginal, anything positive in this crisis is good news for sure.
The article depicts the present picture of the political parties, mainly BJP and Congress, reverting to their earlier form as the elections stand on their head.
While the elections approach, there is a sense of nervous urgency that is clearly visible among the political parties. While Congress Prince, Rahul Gandhi, attempts to defy the age old charge on Congress of being a family party by spreading the word about the young blood infusion into the party, BJP attempts to mask its relationships with RSS. Modi, in an attempt to corner the UPA on Mumbai attacks, says that the attacks had a local help, without realizing that this is exactly what Pakistan wants. But everything is fair in election times.
Talking about other parties too, SP is now friends with person who played a crucial role in Babri Masjid demolition. Election time is the time when anybody can be friend or enemy with anyone. This is our tradition and we do love our traditions!!!
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