The Hindu Business Line : Market View

While global investors in an environment of slowing developed market growth and steady inflation will continue to adopt risk-seeking behaviour, that is, investing in high growth markets like China and India, there will be periods where a pause will occur and investors will reflect upon valuations and look to the likes of Brazil, Russia, Korea and South Africa. With investors now able to access emerging market strategies through some local mutual funds and with a large number of NFOs also hitting the market in 2007, it will be possible for investors to gain from stories not only locally, but also via a carefully selected multi-country portfolio of companies. In selecting the appropriate fund, one should pay attention to the fund managers' prior experience and track record in managing emerging market funds and ability to identify country and stock bets successfully.

OptiMix

The significant risks to the growth story (in India) could be a spike in inflation and capacity constraints, as companies across a multitude of sectors are operating at close to peak capacity levels. The latter is to an extent priced in into stock prices. Inflation is likely to be the biggest source of uncertainty, especially in the domestic context. There has been a sharp spike in agri-commodities inflation over the past six months. If this trend continues, there could be pressure on the RBI to adopt a more hawkish stance. Markets appear to be factoring a hike of 50 basis points this year. The timing of such moves and the possibility of hikes of a larger magnitude could affect market sentiment.

Sundaram BNP Paribas Mutual

2007 appears to be a critical year for the market. Some key issues that would have to be addressed are:

— Commodity prices in the face of a possible slowing global economy, additional supply counterbalanced by greater consolidation, especially in the ferrous markets.

— The much-valued land bank would need to meet the requirements of cash-flow for that sector to now thrive — likewise, same store revenues from shopping malls and multiplexes could be seriously challenged

— Can oil sector companies and their minority shareholders ever get justly compensated?

— The gap between the Chinese banking market cap and the Indian market cap still seems very high. Which of them will see rising NPAs first?

— New forms of regulatory activism in the capital market are a given, considering that deal street is running ahead of the main street. But will we really get to see a platform for minority shareholders?

Franklin Templeton Investments

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