The Hindu Business Line : Market View

The current rally in the equity market is supported by a significant increase in capital investments by Indian companies. Apart from capacity expansion and creation domestically, Indian businesses are also on the overseas acquisition mode. If better revenues and margins contributed to corporate earnings growth in the earlier phase of the equity boom, its sustainability will depend on the growth in investment.

Investment growth has been higher than the overall GDP growth in the last two years, thus accounting for a higher percentage composition in GDP. It has been typically seen that consumption and investment growth alternate in their share of GDP growth, historically. However, the last two years have seen almost equal contribution from both, with investment edging higher.

OptiMix View and Outlook

The origins of the current rally can be traced back to the discovery of India's potential as a future economic giant amongst global investors a few years back. As FII flows started to rise, macro numbers such as economic and earnings growth came in above expectations, leading to an increasing number of global fund managers being convinced about India's potential. In that sense, the key drivers for the current rally are fundamentals, liquidity and India emerging as an `asset class'. Given its size and expected growth over the next few decades, an `India strategy' has become a must for companies across the world with global aspirations. This has resulted in an uptick in FDI flows during the year and, at the same time, the long-term potential has led to global investors taking higher exposure to Indian markets.

Franklin Templeton Investments

With the stock market recording successive all-time highs, powered by sustained economic growth and strong liquidity; these are challenging times for stock picking. The market may have run up sharply but there are enough opportunities for the longer-term bottom-up stock picker. The difference between this rally and others in the past is in the fundamentals, hence, the investors' willingness to pay a premium price for acquiring such stocks. As was anticipated, investors have turned their focus to mid-cap shares, which were languishing for past few months, for above-average returns. They must understand, though, that growth expectations are built into prices.

PruICICI Mutual

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