The Hindu Business Line : Market View

The recent lull in inflows into equity mutual funds is not a particular cause for concern. Inflows into equity funds, not only in India, but in the global markets, have always displayed a performance-chasing dimension, rising during a sustained rally in stock prices and ebbing when stock markets display volatile or declining trends. However, even after factoring in the recent erosion in values, investors who have stayed invested in domestic equity funds over the past 3-5 years would have reaped healthy returns, far outpacing those from other investment avenues.

Franklin Templeton Investments

Strong set of GDP growth numbers at 9.3 per cent year-on-year (for quarter ended Mar'06) is led by continued growth in services, industry and a revival in agricultural growth. As a result, we expect that corporate earnings across most businesses to grow at 15-20 per cent and on a sustained basis. On a relative basis, compared to other emerging markets, while India could be expensive compared to China, Brazil, etc., some element of premium is justified due to sustenance of earnings growth and better returns on capital employed by the Indian corporate sector. And, despite the premium, the market is currently valued at 15x forward earnings, it is not a level to deter long term investing.

However, "Equities are slaves to earnings power", but only over long periods. Over short to medium time-frames, equities have a mind of their own and the market euphoria and panic can lead to significant out-performance or under-performance to corporate earnings. Hence, the culture of timing the market, that has taken roots on the street, is futile.

HSBC Investments

The almost synchronised fall in world markets in the recent past has revived debate on correlations. It would seem that where the Sensex is headed now has more to do with what the Dow did the previous night. But these relationships may not be stable enough to project too far into the future.

Correlations between emerging markets like India and the US have been far from stable. (Nifty and DJIA have been drawn from a common base of 100.) Correlations have typically increased in falling markets, confirming the lack of international diversification benefits when they are most needed.

OptiMix (ING Group)

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