'Market still looks attractive'

With global fuel prices surging, interest rates hardening and the stock markets behaving erratically, investors worry about the future.

But R Sukumar, chief investment officer (equity) at Franklin Templeton Asset Management India, remains unperturbed. "Equity markets still look very attractive," he said, addressing a seminar on 'Investing in uncertain times', organised by mutual fund distributor Mata Securities in Mumbai recently.

"Valuations remain modest. Low retail equity ownership, high corporate governance standards, diversity of companies and tax reforms will be the key drivers for Indian equities in future," he said.

"The GDP growth target of 7 per cent, high business confidence indices and current account deficit point towards a strong economy," said Rajiv Anand, head of investments, Standard Chartered AMC.

According to Anand, higher credit demand and high global oil prices have forced RBI to indicate that the interest rate cycle has turned upwards by hiking the reverse repo rate in the Credit Policy. Hence, bond markets would remain bearish.

Anand suggests investors to look at investing only in cash, floating-rate funds and fixed maturity plans.

"The threat of continuing higher oil prices and the likely revaluation of the Chinese currency along with growth concerns in the US would keep the world markets very volatile," opined Sameer Kamdar, national head (mutual funds) at Mata Securities.

He advises investors to take interest in other emerging investment options like derivatives, commodity futures, real estate and gold. Here are the excerpts from the presentation made by Sukumar and Anand.

Key drivers for equities
R Sukumar
CIO, Franklin Templeton Asset Management

• Retail investment is still low in equities. A slow transformation in investment patterns will enhance domestic savings in equities
  
  
• Recent tax reforms are equity friendly for domestic and foreign investors
  
  
• Indian corporate governance and return ratios compare favourably with regional peers
  
  
• Valuations remain modest, relative to long-term growth opportunity
  
  
• Up-tick in investment proposals after six years of decline; spend on infrastructure up, led by power
  
  
• Concurrent investments and consumption cycle; potential for 10 per cent IIP growth

Concerns

• Hardening of US interest rates and tightening of Federal Reserve's monetary grip
  
  
• High levels of crude oil and commodity prices to add inflationary pressures and impact economic growth
  
  
• Protectionist tilts in developed countries as global labour gets politicised
  
  
• Efforts to cool down the Chinese economy to impact commodity prices
  
  
• Valuations in the mid-cap segment

Bonds markets will remain bearish
Rajiv Anand,
head (investments), Standard Chartered Asset Management

• Strengthening dollar and rising US rates to slow capital flows
  
  
• Inflationary pressures are a concern
  
  
• Sustained high credit growth to replace demand for G-Secs
  
  
• Volatility and pressure are likely in markets due to high Govt borrowing in FY06
  
  
• Liquidity to remain 'appropriate'