The Hindu Business Line : Market view

Global developments have triggered a near term re-adjustment in liquidity, with emerging markets such as India bearing the brunt of the current phase of risk aversion. However, we believe that this outflow was expected after the inordinate amount of flows witnessed in recent quarters, and long-term investors continue to be positive about the macro-economic and earnings fundamentals.

On this score, India is still among the most attractive of markets in the global arena, benefiting as it does, from multiple drivers on the internal and external fronts. The strong domestic consumption drivers and the fact that Indian companies do not rely excessively on external demand as a source of growth are strong points in Corporate India's favour.

Liquidity flows over the medium to long term are bound to track these factors, as investors re-evaluate long-term investment opportunities to deploy their surpluses. Recent trends in fund flows into domestic equity mutual funds also suggest that retail investors are recognising the contribution that equities can make to portfolio returns over the long term. Given the low share of equities in the Indian household savings even a gradual shift is likely to provide good support to the markets.

Franklin Templeton Investments

Most of the market players are yet to get out of the shock of last weeks fall in the markets. Our sense is that the nervousness in market would continue as it consolidates around these levels with volatility on the higher side. Markets in the short term would take cues from the following factors:

The reduction in exposure margins by the exchanges would help brokers in easing the liquidity pressure. The open interest in the start of June F&O market is considerably on the lower side. FII flows needs to be monitored. The results declared by various corporates seem to indicate that the earnings seem to be intact and fundamentally story of India Inc. continues to remain intact. We would advise investors to use these corrections to increase exposure in a staggered manner in the equity markets with a two to three-year view.

Kotak Mutual

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