We remain optimistic about Indian equities in long run: Nilesh Shetty

The month of August 2012 saw the BSE Sensex increase by 1.28% on a total return basis as compared to its level in previous month. The broader indices such as BSE 200 and BSE 500 underperformed the Sensex. IT, FMCG & Healthcare were among the sectors which performed better than the Index whilst cyclicals like Metals, Banking and Real Estate underperformed. Calendar year to date, the Sensex has seen an appreciation of 14.5% (total return basis).

India continues to attract significant FIIs flows, with the month of August seeing net FII inflows of USD 1.95 billion. So far in Calendar 2012, FIIs have purchased equity stocks worth USD 12.2 billion while Domestic Mutual funds have been the net sellers in equities to the tune of USD 1.85 billion. Indian rupee appreciated 0.2% during the month. News flow from Europe continues to remain troubling with the European financial system in a state of flux. Member nations face financial troubles while the European banking system remains in a state of turmoil.

On the domestic front, the month of August saw release of Q1FY13 GDP numbers. At 5.5%, even though it was above consensus expectations, it is still below India’s trend growth as well as substantially below the high GDP numbers of 8.5%-9.0% witnessed between FY05-FY08. WPI Inflation data was slightly subdued, primarily on the back of lower fuel prices. However, consumer level inflation remains elevated around 10% range. The rise in international crude prices remains a matter of concern and can possibly put further pressure on the Inflation. On the political side, announcement of P Chidambaram as the Finance Minister offers some hope of policy traction. However, the stalling of parliament after the CAG report on Coal allotments suggests, any major policy decisions in the current political environment is highly unlikely,`` said Nilesh Shetty, Associate Fund Manager, Quantum Long Term Equity Fund & Quantum Multi Asset Fund.

We remain optimistic about Indian equities in the long run. Despite the double digit rally in Sensex for Calendar year 2012, we see equity valuations as reasonable. We remain hopeful of India continuing to record GDP growth of 6.5-7% over next many years, irrespective of global uncertainties. Investors can consider allocating higher to equities at this point of time for good returns in the long term,`` he added.

Source: http://www.myiris.com/newsCentre/storyShow.php?fileR=20120910170446715&dir=2012/09/10