Market Outlook  - JULY 2012

The equity markets rose in the month of June posting 7.5% returns on the back of declining Crude

prices and hopes of Govt. action on policy front. Gold rose marginally during the month while

Crude corrected by 6% to $82.75/barrel. Inflation increased to 7.55% in the month compared to

7.23% in previous month. As we enter in July, Monsoon will be a major event which will decide the

direction of market going forward. We may witness inflationary pressure if monsoon is weak and

it will delay the rate cuts as inflation control remains priority for RBI and it has indicated concerns

for inflation in last policy review. Apart from Monsoon events in Europe will also give direction to

the markets.

We believe that market is likely to face pressure if monsoon is bad and Nifty could again correct to

4800 levels but in case monsoon is normal Nifty could break on upper side and touch 5600 in

short term. Long Term investors should use intermittent corrections to accumulate equities for

coming years. 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 recommend Dynamic Bonds

Funds and Medium Term Income Funds. We advise adding income funds in your portfolio in

gradual manner as we may enter soft interest regime in second half of the year, but investors

should avoid aggressive income funds at this point to time which take long duration calls.

We maintain our view to

hold 5-10% allocation to gold in the overall portfolio.