Despite volatility,India stays attractive

A platform is well laid for economy to grow at a consistent pace. The inflationary pressure should ease driven by monetary policy measures and lower projected fiscal deficit. The coming few months will be marred with volatility amidst geo political concerns,quarterly numbers and an approach to end of

QE II. Interest rate increase in European region in the next quarter on the back of prospective higher inflation is to be seen. The implications of the catastrophic disaster in Japan on global growth is yet to be ascertained.

How does this all augur for India?

We believe that India in the global turmoil would eventually stand out due to its inherent strength of demographics leading to sustained GDP growth.

It would be very hard to ignore India as an investment destination in the global allocation. Longer term,India is a compelling story.

The current valuations in Indian Equity market look fair. The Union Budget provides a definitive direction to reforms such as GST and DTC. Greater emphasis is laid on the infrastructure sector.

The correction in the Indian market does give a good opportunity to invest and thus the longer term investors ideally should remain invested. Once the haze of global variables clear,market should deliver consistent returns.

The prime raw materials in the form of commodities are likely to come down as we are closer to the end of QE II. This augurs well going forward for the health of the margins in many companies.

The coming few months could be marred by volatility and is thus difficult to predict an outcome in the shorter end and thus difficult to time it to the bottom. Sectors,which look as potential outperforms,are Banking,Auto,IT and domestic consumption driven sectors. We think that we are towards the end of interest rate tightening. Also,the demand for credit is

going to be consistent in the light of stable GDP growth. Thus interest rate sensitive sectors look positive. Increase in spending power in rural economy,on the back of higher reserve prices for their produce also looks positive. Wealth creation among wider youth should continue to demand strong momentum in auto and lifestyle segments.

To sum it up,we are in a volatile environment led by many variables.

However,the environment brings brighter future for Indian economy. The consistent high GDP targets,increased standing on foreign policy measures and a commitment to the path of reforms makes India an attractive

investment destination for long term. We are going to witness an exponential growth in entrepreneurship and risk taking abilities as a society,driven by ambitions and aspirations.

And this all will augur well of Indian equity markets.

— Author is Director – Equities Ambit Capital