Market Outlook - Sep 2011

The month of August will be remembered for a historic event which took place in USA. S&P downgraded USA from AAA rating to AA+ resulting in huge fall in global equity markets as well as Indian markets. Nifty lost almost 500 points after this event. Crude oil corrected by from 95$/barrel to $86/barrel as worries emerge about global economic slowdown. FII remained net sellers in Indian equities for the month of August but DII bought into Indian equities. We continue to remain cautious on equity markets for the next 2 months because of high inflation, rising interest rates and global concerns. We believe that Indian market will digest bad news from global international markets in couple of months and start taking cues from domestic events. Indian equities are underinvested at present and any positive news on domestic front will be a boost to market. Equity market is likely to see strong upward momentum in 2nd half of FY 12. Investors should avoid lump sum investment in equity market at this point of time and invest in staggered manner. We hold our advice to investors to keep buying equity mutual funds through SIP/ STP route to generate wealth over the long term. On debt side we continue recommending FMPs as Bank CDs and other CPs are available at very attractive rates and locking these papers in FMPs will yield good returns. We advise investors to invest in FMPs maturing in April 2013 to avail indexation benefit because one year FMP will not be available for indexation if Direct Tax Code is implemented in its current form. We maintain our view to hold 10% allocation to gold in the overall portfolio. Gold has seen a strong up move in last month followed by a mild correction and we continue to remain bullish on gold in near term.