The Hindu Business Line : Market View

Stocks now trade at lower valuation levels compared to a couple of months ago. The downside risk may not, however, be over, as the rising interest rate seeps into the earnings estimates over the next few quarters. The auto and home loan growth for the April- June quarter will provide a clearer idea of the trends in the economy for FY08; they will be the first concrete evidence of the emerging impact on demand of the sharp hike in interest rates. Even if stocks go through a period of consolidation and have a downward bias, this is not, however, a time to panic and move out of equities completely. Investors should enhance allocation to fixed-income even as they deploy a part of their funds in a phased manner in equities. Historically, a discipline to invest in equities through difficult periods (such as 1996-1998, 2001-2003) has proved wealth-accretive. As we have advocated consistently, realistic expectation of returns and a long-term investment horizon are a must.

Sundaram BNP Paribas Mutual

Ever since the secular uptrend in global equities began in 2003, every year, somewhere between March and May, asset prices have been slammed. However, it is not the nature of the beast to let most people anticipate its movements for too long. The script was overdue for a change and that's why this year's correction turned out to be rather shallow even though most market participants were readying themselves for more violence at the first sign of a wobble. What helped the market achieve the benign outcome is the stunningly high degree of fear in the marketplace, which is highly unusual for a bull-run that has extended so long. Bull markets climb a wall of worry and it seems there are plenty of walls left for stocks to mount. A time will come in the ongoing cycle when investors buy into the secular bull market thesis and become certain about its longevity. The feeling of acrophobia will make way for an ever-rising comfort level with higher valuations. Markets are still some distance away from such sociological excesses.

Morgan Stanley Growth Fund Quarterly Newsletter

The market could remain cautious on the back of concerns on global liquidity and domestic concerns on inflation and sustainability of growth momentum. Banks and other interest rate-sensitive sectors are likely to be worst hit by the interest rate hikes. Hence, it is time to focus on sectors with better earnings visibility and relatively less exposure to interest rate hikes. We believe that interest rate hikes are more to cut back on excesses happening in the economy. Volatility is certainly on the rise but if one were to ride out the short to medium term, it is still an extremely healthy environment. Markets are expected to remain in range of 11500-13000 in short term. We will see push triggers post monsoon and after the UP elections, when the Government may announce fresh reforms.

ICICI Prudential Mutual

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