The Hindu Business Line : Market View

Rising borrowing costs for Corporate India can be mitigated to a large extent with cheaper overseas borrowings, but retail loans and housing starts are likely to witness a slowdown. However, a slowdown in credit growth is desirable as current growth levels are unsustainable.

Volatility was expected at higher levels given the tepid nature of FII flows in 2007. We believe it is futile to focus on market levels over the short term and one needs to keep in mind that economic/earnings fundamentals are robust. India as an asset class continues to attract interest among long-term global investors and belief in India's economic potential is growing. Domestic flows could be impacted by the potentially higher returns from fixed income instruments but, on a risk-adjusted basis, we expect equities to outperform over the medium to long term.

Franklin Templeton Investments

We believe that Indian companies are increasingly enhancing scale of their operations. This is a result of robust demand in domestic market as well as the ambition to have global footprint to be able to service a larger market. Incidentally, our research shows that the number of companies with net profit (for nine months ended Dec `06) of Rs 100 crore or more has risen from 124 to 161; and those with a net profit of Rs 1,000 crore have increased from 15 to 27. Going forward, one needs to watch developments on employee costs, which are likely to rise as businesses look to expand their pool of skilled workers. Interest cost is another component likely to show rising trend on account of (a) increased borrowings to fund capacity expansions; and (b) rising interest rates.

Birla Sunlife Mutual

February has historically been influenced by Budget expectations. But with most of the major changes in the taxation structure having been made over the past several years, the significance of the Budget as a major market driver has declined in recent years. Given the structurally strong demand environment, high business confidence and with an EBITDA margin expansion for the second consecutive quarter, we are likely to see a further upward revision in earnings growth estimates once again. The Sensex earnings growth has already been surpassing consensus estimates in the past couple of years. India is likely to sustain its premium to other emerging markets on account of its above-average earnings growth and return on equity figures. Higher interest rates could be a spoilsport.

Principal PNB Mutual

The most likely outcome for the global economy in 2007 is slower growth with modest disinflation. Growth in Europe and Asia will rely less on US demand than in the recent past. Each of these major economic regions is likely to grow at an annual rate of about 2 per cent. The slowdown in the US will be triggered by weakness in the property market that will spill over into consumption. The predominant risk to PIMCO's forecast is that the downturn in the US economy will be worse than we anticipate because of a more severe contraction in housing.

PIMCO Market Outlook

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