Though the macro-economic fundamentals in India look to be robust and GDP growth would continue at roughly 9% and the rate of inflation is under control as promised by the Union Finance Minister, an investor needs to grapple with qualms of global uncertainty.
The recent meltdown of the stock indices across Asia, including India suggests that money has been flowing out of the emerging markets. Heavy FII selling could be due to a mix of redemption pressures, aversion to risk and re-balancing of portfolios. Most large Banks in India have witnessed a scarcity of capital and will look to unwind some of their proprietary positions from their balance sheets before the year ending, 31st March, 2008.
The recent drop in stocks may be attributed to a recessionary trend shown by the US markets. However, corrective action envisaged by the US govt. to contain the sub prime meltdown will begin to play out and this in turn would ease global as well as local interest rates.
India would continue to be among the fastest growing economies in the world which would continue to invite foreign funds flow participation as global investors would be willing to pay a premium in an environment which envisages growth potential. Future investors would perhaps look at equity markets through mutual funds and insurance products.
The negative sentiment for the IT sector primarily comes from the appreciating rupee and rising wage rates. Recognizing the current trends, a further appreciation of the rupee seems unlikely and hence the IT sector would continue to remain stable at the current levels. Retail investors who have a long term holding capacity would tend to benefit from IT stocks. I for one would park my money on infrastructure companies, particularly young companies in the mid-cap segments who focus more on valuation risks and promise high growth potential.
ABHIJIT MAITRA
The recent meltdown of the stock indices across Asia, including India suggests that money has been flowing out of the emerging markets. Heavy FII selling could be due to a mix of redemption pressures, aversion to risk and re-balancing of portfolios. Most large Banks in India have witnessed a scarcity of capital and will look to unwind some of their proprietary positions from their balance sheets before the year ending, 31st March, 2008.
The recent drop in stocks may be attributed to a recessionary trend shown by the US markets. However, corrective action envisaged by the US govt. to contain the sub prime meltdown will begin to play out and this in turn would ease global as well as local interest rates.
India would continue to be among the fastest growing economies in the world which would continue to invite foreign funds flow participation as global investors would be willing to pay a premium in an environment which envisages growth potential. Future investors would perhaps look at equity markets through mutual funds and insurance products.
The negative sentiment for the IT sector primarily comes from the appreciating rupee and rising wage rates. Recognizing the current trends, a further appreciation of the rupee seems unlikely and hence the IT sector would continue to remain stable at the current levels. Retail investors who have a long term holding capacity would tend to benefit from IT stocks. I for one would park my money on infrastructure companies, particularly young companies in the mid-cap segments who focus more on valuation risks and promise high growth potential.
ABHIJIT MAITRA
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