Diversify your Portfolio with Proper Asset Mix

The healthy growth rate of the economy which is maintained over the years shows its resilience and its great long term potential.

Equity Market Scenario

·         The Indian economy is expected to grow at 7.2% in FY10 and 8% plus levels in FY11.

·         Recent Growth driven by higher government spending, increased private consumption and investment.

·         From close to 0.6% in April'09, industrial production has grown to 15% in Feb'10 due domestic recovery, inventory restocking and fiscal stimulus.

·         In coming months good IIP numbers are expected on lower base and revival of domestic demand.

Debt Market Scenario

·         The government has begun withdrawing most of the policy measures announced during the global credit crisis. This can be reflected in the following,

-          Hike in SLR by 100 bps in Oct 2009 and CRR ratio by 75 bps in Jan 2010.

-          RBI raised key policy rates - repo and reverse repo by 50bps since March.

·         It is expected that the process of monetary normalization will continue in coming months to contain inflation.

·         Credit growth which was at 10% in Oct'09 has now improved to 17% by March'10 end.

·         Deposit growth has been coming down and is now presently at 17% by Mar 10 from 22% in Apr 09.

·         Money Supply is also down to 17% from 20% at the start of financial year.

Opportunity in both the Markets

Debt Market:

·         The short to medium tenor of the yield curve is still steep and offers value in terms of roll down effect and higher accrual in rising interest rate scenario.

·         Inflation is expected to remain high in coming months and thereafter come down slowly on base effect.

·         Government is slowly withdrawing the stimulus to contain inflation.

·         This gives an excellent opportunity to enter the debt markets to lock-in long term gains.

Equity Market:

·         India is among the few economies globally which continues to deliver strong broad based growth on a large scale.

·         Industrial production, which was major growth-driver in FY10, is likely to grow at close to double-digit in FY11.

·         Markets are currently in the phase of consolidation after a sharp rise in the last 12 months.

·         Thus this will present an opportunity to enter the equity markets to create a strong portfolio.

What should be the Investment strategy?

·         Ideal strategy in the current scenario will be a proper asset allocation that will provide both steady returns and capital appreciation.

·         Investors need an investment strategy which keeps in mind both the country's growth as well as its inflationary conditions.

·         On the debt side the product should take advantage of the current high bond yields and steepness of short to medium tenor of the yield curve.

·         On the equity side the product should take advantage of temporary volatility created by the international events which will give an excellent opportunity to create a good quality portfolio.