Market Outlook - Jan 2012
The month of December traditionally proved to be a good month for equity markets but this time it was not and we saw further correction in Indian equity markets. Inflation has shown some moderation but time has not come yet for RBI to cut interest rates as indicated by RBI in its lastmonetary policy review. The rupee fall continued for the month but later currency market saw some intervention from RBI to arrest its fall. Fiscal deficit is set to rise with Govt. further borrowing Rs. 40,000 crore. India Inc. will start FCCB payment from this quarter and it is likely to put pressure on their balance sheets because of rupee depreciation. European countries are working towards resolving the crisis but any recovery is going to be the slow process. Gold corrected 6.8% in the month while dollar rose 2.10%. Crude oil price decreased marginally from $99.13/barrel to $98.83/barrel. FII and DII, both were marginal buyers in Indian equities during the month.
We believe that situation on domestic front will improve gradually but mood remains pessimistic
on bourses. We may witness some more correction in equity markets in this quarter as Q3 results are expected to be soft, especially from mid cap space. 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 maintain our view to hold 10% allocation to gold in the overall portfolio.
