Wealth outlook

We asked veterans in six different areas of personal finance to gaze deep into their spreadsheets or crystal balls to see what the coming year holds. Take a look...

     Print Edition: November 1, 2007

Past perfect, future tense. Does that describe your portfolio? Or are you looking back at annus horribilis and worrying about whether the year ahead can possibly get worse for your investments? Often it seems that the future’s bright only in the world of fiction.

In the real world, the future could mean volatile stock markets, out-of-control currencies, manic mutual funds and the like. Or, of course, it could just mean plain sailing ahead for your portfolio. The point is that the future is difficult to predict.

However, if you’re an expert, you can take an educated guess about what the year ahead has in store. Which is why we asked veterans in six different areas of personal finance to gaze deep into their spreadsheets or crystal balls to see what the coming year holds.

Browse away and experience their distilled wisdom. These may not be the exact answers you are seeking, but we hope they will help you make more informed — and profitable — investments in future.

STOCKS

Since October 2006 the Nifty has risen by close to 50%; despite several corrections and volatile swings the upward trend has remained. Though the rate of wealth creation in the stock market will slow down, there is no likelihood of a sustained downturn as the experts on this page unanimously agree.

Though with global markets increasingly getting integrated, volatility is reality. There is no general strategy that one can adopt to enter the markets at these levels. However, that should not keep you away either.

Even at current levels, if corporate India keeps up with the earnings growth it has posted in the past five to eight years, the Nifty itself could show an annual returns of 15-28%.

Go ahead, start investing, there is nothing called the right time. The oft-repeated, yet worth repeating, principal of stock investing is: it’s the time spent in the markets that matters more than the time of entering the market.

Get in or get out? If this dilemma is keeping you away from stocks, well, start investing now. Four experts tell you why stocks are still good for creating wealth.
Amitabh Chakraborty, President (Equity), Religare Securities
"Timing the market is impossible; invest with a time-frame"
Jayant Pai, AVP - Institutional Equity Sales, IL&FS, Investmart Securities
"In the long run, no other asset class beats stocks in returns"
Dipen Sheth, Head of Research, Wealth Management Advisory Services
"Follow an active asset allocation for the best results"
Seshadri Bharathan, Director - Stock Broking, Dawnay Day AV Securities
"The liquidity in the market infuses confidence to stay invested"
How long will the bull run last?This is a long-term bull run with periodic short-term corrections. Good economic fundamentals can sustain relatively higher valuationsUntil a 20% correction happens from the peak, a bull run is believed to be intact. We have seen corrections of around 15-18% in the past four yearsIt’s a long term bull-run (read: a decade) with periodic short-term correctionsThe way the markets are behaving, I think this bull run will continue
What are the key drivers of the markets right now?I would say FIIs. We have seen huge liquidity since the last 0.50% cut in interest rates by the US FedDefinitely FIIs, which by default is encouraging domestic funds and investorsIt’s a combination of FIIs, domestic mutual funds and retail investorsDomestic fund houses and definitely FII participation, as they see the long-term growth potential of India
What are the favourite sectors/themes right now?I see strong momentum in select real estate, infrastructure, petrochemical, power and commodity stocksInfrastructure, especially power, metals and engineeringThe entire “core” sector (construction, power, utilities, oil) and the consumption sector (retail, media, telecom, auto)Infrastructure holds a lot of promise, as does the consumption sector
Will the Sensex touch 20000 by March 2008?I estimate 19000 by March 2008I don’t think the index will cross this mark by MarchI discourage predicting such numbers. But I believe India’s improving performance will be reflected in stock pricesThough it is not right to predict Sensex numbers, I think it may reach somewhere close to that
What is your advice to retail investor?Investors should choose their entry point carefully, and stay invested for the long term in order to ride the volatilityStay invested in the stock market (directly or indirectly) unless you have to cash out in order to finance a pre-determined goalAllocate (80 minus your age) % to equities through at least two “managers”. Invest the rest equally across bullion and debtTo make the most of the bull run, stay invested keeping your risk profile in mind

Next page: Mutual funds

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