Leading Views On What To Do In 2013

Sankaran Naren
CIO – Equity & Fixed Income
ICICI Prudential AMC

With the government biting the bullet on some key reforms like FDI in retail and oil price hike, etc., the intent on fiscal consolidation has been evident and reassuring. It is difficult to predict the market direction. However, volatility will clearly be the order of the day and much more a reality than that witnessed in 2012, i.e. market will not be uunidirectional. Globally, economies are going through a debt de-leveraging cycle. In such a scenario, equities seldom provide unidirectional multi-bagger returns. Therefore, with volatility becoming a reality, investors should look towards capitalising on this trend. Infrastructure bottleneck has been a long standing and persistent problem that now requires immediate redressal. We believe that an improvement in the fiscal deficit also has the potential to benefit the infrastructure companies, which have been under stress due to the high interest costs. 2012 saw tough decisions being taken and the path to fiscal consolidation being initiated. Well begun is half done, assuming that the fiscal consolidation roadmap is well followed through in 2013 through continued action and execution of reforms.[PAGE BREAK]

Ravi Gopalakrishnan
Head – Equities
Canara Robeco Mutual Fund

For economic growth to go back to the earlier levels, both consumption and investment themes will have to play out. The consumption theme continues to remain very strong, given the large scale underpenetration across India, and most of the growth is coming from Tier II and III cities, where demand remains strong. The government has already take a few steps in the form of increasing foreign ownership in multi-brand retail to increase foreign investment, and hiking the price of diesel to bring down the fiscal deficit. More such measures are required to revive the investment demand in the economy. If the government is indeed able to push the reforms agenda, the market is likely to resume its upward trend. Going forward, if the interest rates decline and global commodity prices continue to be benign, India will be amongst the biggest beneficiaries, given the high dependence on oil imports. The market is currently trading at 14x the FY14 earnings, which is below the long-term average multiples. If the government continues with the reforms agenda and takes steps in terms of reviving growth, India will continue to remain a good investment destination and equities are likely to be the best asset class in 2013.[PAGE BREAK]

Mahesh Patil
Co-CIO – Equity
Birla Sun Life AMC

As we enter 2013, it will be important to see how the recent government announcements lead to action on-ground and how it helps to revive the corporate investment sentiment. We expect a slow and gradual revival of investment cycle in 2013, backed by a slew of reforms in the areas of land acquisition and the setting up of the NIB. The domestic economy and related investments will also get support from lower cost of capital as the RBI starts cutting interest rates next year, with the focus shifting from inflation targeting to reviving growth. We see around 15 per cent upside for the market in 2013, driven predominantly by earnings growth. The earning downgrade cycle throughout 2012, seems to have troughed. We believe that 2013 should see a slow and gradual improvement in GDP growth to 6-6.5 per cent range. The market is trading around the historical average one year forward PE multiple level of 14.5x. As reforms and a favourable rate cycle kick in, we could see a further improvement in sentiments leading to a market re-rating. A decent earnings growth coupled with PE expansion on the back of positive developments on reforms will help the market deliver above average returns.[PAGE BREAK]

Sandip Sabharwal
CEO – Portfolio Management Services
Prabhudas Lilladher

The year 2013 starts in an interesting fashion. The markets have rallied strongly, however the participation in the markets from domestic investors has been extremely low. In fact, domestic investors have sold equities and redeemed from mutual funds at a record pace throughout the year. On the other hand, foreign investors have been quite bullish on India and have put in nearly USD 20 billion into the Indian stock markets over the last 12 months. I believe that we are already in a new bull phase, which will establish itself and grow stronger over the year 2013. Interest rate sensitives will come back in a big way next year and private sector financers, infrastructure and auto companies look well placed. The contrarian bets for next year are the telecom and real estate stocks, where the negatives have clearly bottomed. Strong mid-cap companies with robust businesses that have suffered due to high input cost pressures, low demand or high interest rates will come back in a big way and will be the story of 2013. We will certainly see a new high in 2013. However, the main question is how high we can go, especially if we end 2012 up 30 per cent from the end of 2011.