Corporate India continues to score well over emerging market peers and the rest of the world on two parameters: return on equity and lower earnings cyclicality. The former reflects domestic companies’ efficiency in capital utilisation and better demand/pricing mix.

Confidence in corporate India is also strengthened by the following: leverage levels have declined compared with the past; more than 130 companies in CNX 200 are generating more profits than they did in the financial year 2008, which was a higher growth year across sectors; over the last three fiscal years, CNX 200 companies reported 65 per cent increase in book value.

In contrast, the index has risen by 1.8 per cent between 2008 and now, clearly reflecting valuation gap. - Franklin Templeton India Mutual

Prefer cash-flow positive companies

At a micro-level we have maintained that a healthy balance sheet is a key determinant for a buoyant capital market. Earnings growth will follow that.

We rather look at the current environment as an opportunity to build a portfolio that would lead into the next cycle.

Our preference for consolidators and cash-flow positive companies is well-documented. And both of these will play out in tandem over the next couple of years.

Weaker balance sheets would have a high mortality rate leading to consolidation. — IDFC Mutual

Gold to move higher

We expect gold prices to move higher as more pro-quantitative-easing statements are made across regions such as Europe and the US.

Gold prices have remained range-bound since the end of the last quantitative easing in the US. While higher inflationary pressures have been a key catalyst, inefficient monetary governance has led to investors globally losing faith in currencies.

With global crisis continuing, it would entail devaluation of currencies, thus making the case for higher gold prices stronger. Central banks continue to make a strong contribution to demand according to the recent Gold Demand report. — Canara Robeco Mutual

Commodity-fuelled inflation to come off

Global commodity indices indicate that commodity-fuelled inflation maybe coming off in rupee terms, which has started to translate into lower trajectory in WPI inflation and even lower in WPI manufacturing inflation (the RBI’s measure of core inflation).

Even though the food component still remains stubborn and volatile, the trajectory for headline and core inflation is coming down. This could eventually force the central bank to lower interest rates.

India’s dependence on global capital flows combined with persistent negative current account has led to significant depreciation in the domestic currency. It may look worrisome on the surface.

However there seems to be an involuntary stimulus provided by the falling rupee. A lower rupee is likely to provide huge incentives to exporters and for import substitution, in turn helping domestic business activity.

Keeping sentiments at bay, today’s rock bottom expectations and cheap valuations demand higher allocation to equity assets. — Birla Sun Life Mutual

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