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Fighting Volatility

Print Edition: February 2012

Last year turned out to be quite tumultuous for the Indian markets. With the benchmark indices falling around 25 per cent, India is among the worst performing equity markets. Apart from major global headwinds-Europes debt crisis and US growth crisis- a number of domestic macroeconomic factors also contributed to this.

Industrial growth was low. The April-October 2011 IIP growth was only 3.5 per cent year-on-year. However, the November 2011 IIP growth was at 5.9 per cent, a rebounce over 4.7 per cent recorded a month back. But the GDP estimates still remains at sub-7 per cent level. The value of rupee has declined. This has taken a toll on the economy as well.

Inflation which remained above 9 per cent till November 2011,improved and was at 7.47 per cent in December. Analysts believe this to stay in the range of 5-6 per cent in the coming financial year. This gives space to the RBI to effect rate cuts. The domestic policy reforms landscape, with decisions on key issues such as FDI in retail, Direct Tax Code, Lokpal and land acquisition pending, is also not very pleasant.

Our portfolios reacted to all these turbulence as well. However, the effect, as compared to the equity markets, was subdued.

How the portfolio fared

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