Market View

“For the first time after several quarters, we are able to see distinct value in the market and see blue chip stocks at reasonable valuations. Though many are still defensive on equity performance, we believe that markets can quickly turn when news can turn marginally positive. And what is that? On the margin, we expect inflation to decline and hence interest rates. That could improve corporate profitability, as capacity creation has remained muted. Then, fears of margin contraction and profit slowdown in 2012 may seem exaggerated.

Increased portfolio allocation into India would remain a key positive for the market and any sign of this taking place could move markets fairly quickly. Among equities, we believe companies with low volatility in cash flows due to lower leverage will be preferred though there may be bouts of risk trade coming through. March will be a crucial month for the markets and we will need to be prepared for a fade away in equity markets and then a recovery thereafter. “

- Sundaram Mutual

“Going forward, BFSI sector may witness increasing pressure on asset quality. Commodities and infrastructure sectors are expected to post poor results even though the expectations are already low. IT, Pharma and FMCG may continue to be stable. Further EPS downgrade can be expected, post the results. We can expect a reversal of the monetary policy stance in Q4FY12 as inflation is likely to soften and economic growth numbers are expected to further weaken.

Pessimism is likely to be highest in the next two months, post which rate reversal may give some respite. Currently the market is trading at a PE of 13.4 and 11.9 times expected earnings of FY12 and FY13 respectively. Valuations continue to be attractive for long-term investors.”

- JM Financial Mutual

“What is getting more important from the bond yields perspective is the huge amount of borrowing and supply of bonds that are hitting the market. More than future rate hikes, the supply of bonds (due to fiscal deficit, small savings collection slippage or tax slippage) is resulting in upward pressure on interest rates and yields. Heavy borrowing by the central government in this part of the year would also tend to result in ‘crowding out’ of borrowing by the corporate and private sector.

For many investors, it is not possible to call the top of the interest rate cycle, at which point, theoretically, one should go on long duration and get totally invested in long-term government debt. Hence, we believe that increasing allocation to medium duration debt in the Short Term Income Fund category, wherever feasible, as also in the income fund category, will really start paying off in the next 6 months to one-year period. The higher holding period is required to ride out volatility arising from any volatile bond yield movements.”

- Bharti AXA Investment Managers

COMMENT NOW