A rather difficult year for the investor community is coming to a close. The steep 25% slide in the Sensex from 20,509 on 31 December 2010 to 15,379 on 19 December 2011 perhaps sums it up. Huge investor wealth has been wiped off during the year. And the indicators do not suggest an early revival in the markets. Foreign institutional investors, which hugely influence market trends, continue to take a guarded view on India, with net outflow during 2011 of Rs 1,725 crore till December 15 compared to net inflows of Rs 1.3 lakh crore in 2010.
The index of industrial production data for October 2011, which showed industry contracting by 5.1 per cent compared to a year earlier, the first time it shrank since June 2009, has dampened sentiment further.
The Reserve Bank of India has ignored industry's clamour for a rate cut in its 16 December mid-quarter review of the monetary policy and has maintained status quo on the back of persistent high inflation.
The slide in the rupee against the dollar continues, hurting industry's competitiveness, with the prognosis not being in the rupee's favour. Only a very bold person will stick his neck out and predict that 2012 will definitely be a year of wealth creation.
The Finance Minister, Pranab Mukherjee, who ostensibly has his finger on the pulse of the economy, has himself warned of difficult days ahead. The global scenario, especially the euro zone crisis, is adding to the worries.
In such a situation, investors will quite naturally be searching for answers on the investment strategy to be adopted as they step into a fraught New Year. As most investment gurus advise, the best time to build a portfolio is when the general mood is pessimistic so that when things begin to look up once again, which they surely should at some point sooner or later, you will not be left ruing that you missed the bus.
In this issue, we look at how things are likely to evolve in 2012 and bring you some of the investment options across equities, mutual funds and commodities, and the strategies that might help you navigate this period of uncertainty. We also look at defensive sectors and stocks that could limit your downside as we go ahead. However, if you are an equity investor, be warned that this is not a market for the faint-hearted. While one should ideally hold equities in the overall portfolio, one needs to have staying power. Keep investing in a systematic manner and hope that just as no one bargained for the relentless slide in the market in 2011, the doomsayers are proved wrong and things could improve swiftly in 2012.
The Money Today team wishes you a very happy New Year.
SARBAJEET K. SEN