Follow Investment Discipline

In our opinion, the markets are going to be volatile even during the next year, as this volatility persists not only in India but is a global phenomenon and things have not stabilised in terms of world economy.

The markets till now have reacted to factors like the huge run-up in the last one year where it almost touched 21,000 and secondly, the huge correction in the indexes world over with commodities too correcting sharply. However, if we have some positive developments coming from the world’s major economies like the US and the UK in the next 6-8 months, we might see the markets stabilising.

We also have elections next year and if we see a stable government elected at the centre, we might see that all the markets, including currency and commodity, stabilising in the second half of 2009.The global financial crisis is the crisis of confidence and this sub prime crisis hasn’t built up overnight. It has now become so big that it is difficult to bring the monster under control. This is the problem that people have been living with and it has been a result of wrong policies and excess leveraging where the money was directed to junk-rated people and companies.

This crisis will definitely impact emerging economies like India and China. However, we feel that the India Growth Story is intact and if India has to become a superpower by 2020, we will require huge investments in the infrastructure sector which now acts as a bottleneck to growth.

Thus, we are bullish on the basic infrastructure sector which includes construction, capital goods, cement, and steel. In addition, if we want to be a global player, we have to have a sound banking system and therefore I am also bullish on such basic industries for growth as banking and finance. And finally, the domestic sectors which are isolated from the global markets like retail and entertainment will help take the momentum forward too. Meanwhile, defensive sectors like FMCG and pharma look good in the medium term perspective.[PAGE BREAK]

The impact of the stimulus package will only be seen after the next two quarters and this will be limited as the money allotted is still not enough for the growth of the economy which has slowed down drastically. We feel that in the near future we might see some similar packages being offered by the government. However, it will be difficult to revive the economy only with these stimulus packages. And unless we solve the problem of tight liquidity, we will continue to see this slowdown problem persisting despite such booster doses.

We feel that inflation might come down to a level which will once again force the RBI to cut interest rates very soon and this may form a part of the forthcoming stimulus package. Even the 20 years’ Treasury Bill’s yield has fallen by more than 1.5 per cent which suggests that we might witness an era of declining interest rates. This will surely be a positive trigger for the economy and especially for interest-sensitive sectors like construction, housing, auto, etc.

At G Das, we advise and request all our retail investors not to invest directly in the equity markets unless one has a long-term view of 10-15 years. And one should invest in the top 10 funds through SIP on a regular basis as this disciplined investment approach can easily beat returns from any other investment avenues in the market.