The Hindu Business Line : Fund managers still hopeful of further appreciation

The run-up to Diwali saw the markets turn extremely choppy, the only thing constant in such circumstances being changing stock prices. Net asset values of equity funds were swinging up and down, once again buttressing the belief that equity investments are not for those without guts.

However, going forward, some quarters still expect to clock record gains from equities. Expectations on the GDP front, they feel, could keep sentiments in the positive territory. A number of other factors, including those related to specific sectors, could also play a constructive role. These also include the performance of Indian companies in the services sector as well as the country's achievement in the context of outsourcing.

Those who are aware of the latest situation point towards India's substantial foreign exchange reserves, higher corporate profits, greater consumer spending and better export performance. All this, they say, add up to create a sound case for emerging market investors. India is already among the better-known emerging markets, given the valuations and growth rates. In fact, some overseas investors are increasingly taking a serious note of the country's improving risk profile.

It remains to be seen whether domestic investors are still willing to pump in money into the stock markets. The smart ones have already recorded critical gains (particularly if they had entered when the indices were really down) and may hesitate to allocate more, at least for the time being. A sudden bout of negative developments will certainly keep them away from the markets, at least for the time being.

But let's tune in at this stage to what the veteran Mr Ravi Mehrotra, President of Franklin Templeton, has to say on the matter. Mr Ravi, who was part of the original Kothari Pioneer team (the first private-sector player), believes that optimism needs to be tempered with a dash of realism as well.

"The current rally in the equity markets had been long overdue, given the strong fundamentals and attractive valuations prevailing for a couple of years", he states, adding that the latest uptrend is also a result of a rise in global liquidity as central banks have opened the "monetary spigots to deal with sluggish growth and ward off deflation".

Further, the macro-economic situation in the US is still uncertain; any negative developments could impact the global liquidity situation.

True. And, as always, the over-enthusiastic is advised not to expect big returns every time exposure is taken to equities. In fact, decisions on investment should be taken after analysing all material factors.

Yet experienced investors still remain hopeful simply by considering the changes that have been happening all around them.

Feedback may be sent to blcal@vsnl.net

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