Relax! India will outperform by year-end:

 Indian equities have had a rather unexpected wobbly start to 2013, after showing remarkable resilience in 2012. This shakiness, according to Sakthi Siva of Credit Suisse, has to do a lot with investors booking profits on their investments. Her own strategy is to buy the dips. So with recent correction, they are highlighting India now as one of the four cheapest markets in the region." she told CNBC- TV18 in an interview”. 

This is the fifteenth time since 2000 that India has made it to the "cheapest four" list of Credit Suisse and 13 of the 14 times India has outperformed. "I am quite confident that India by the end of the year will actually be a major performer," Siva says.

HSBC Global AMC – Investment Director-India Equities thinks’ likewise when he say’s India is looking good. There is a lot of opportunity. We find a lot of attractively valued stocks in India.

Going forward the Indian markets looks volatile, reacting & over-reacting every news coming along….. Having said that the trajectory will be upwards… good opportunity for investors with three time horizon.

For investment tenure of 12 months to 18 months stick to Debt Fund for post tax returns around 9%. In other words it’s high time you get rid of your traditional Bank FD. 

HOW BUDGET 2013-14 BENEFITS YOU

Budget presented can be described as solid, sound & credible. Not a spectacular one, no fireworks, not an election budget in the sense of populist giveaways, but yes, a subtle election budget- to bring inflation down, stimulate growth, make sure that foreign investment comes in & keeps rupee strong so that CAD (current account deficit is fixed. It aims to satisfy the investment community, the voters and also promotes the notion that India is turning around. It is, therefore, not an austerity budget. The importance of stability in tax rates is well highlighted & the surcharge on the super rich for one year will be entirely acceptable. The budget seems to be positive for the markets and for the economy.

SALIENT POINTS

• FY13 growth rate pegged at 5% and FY14 growth pegged at 6.1-6.7%
• Capital Markets
• Proposed launch of inflation indexed bonds;
• RGESS modified to include mutual funds and investments in three consecutive years; RGESS income limit raised to Rs. 12 lakhs;
• STT reduced and introduction of commodities transactions tax
• Fiscal Deficit: To be reduced to 4.8% in FY14 from the revised 5.2% in FY13
• Taxation
• No change in taxation slabs or tax rates
• Tax credit of Rs. 2000 for individuals with total income up-to Rs. 5 lakhs
• Surcharge of 10% on individuals with annual taxable income of over Rs. 1 crore
• Surcharge increased to 10% from 5% on companies with annual taxable earnings of over Rs. 10 crore (5% for foreign companies)
• Surcharge on dividend distribution tax raised to 10% from 5%.
• Addl. Rebate of Rs. 1 Lac (over and above Rs. 1.50 Lacs presently) for Interest on 1st Housing Loan for a House Value up to Rs. 25 Lacs.

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Time to Capitalize opportunity created in Market:

Classic example of Media hype:-

Today’s ET headline: - “Market Mourn as Fed Looks to Withdraw Stimulus Measures”

However those who would be affected most are nonstop pumping money in our economy and environment back home is created as if everyone should become seller in market or at-least should not think of fresh investments:

How-ever actual scenario is that market is gone in oversold region(courtesy BEARS) & since investment support has weakened on account of advance tax outflow as well as yearend financial adjustment in  Balance-Sheet, it has weakened buying support resulting weakening (correction ) of indices.

We expect the recovery to start definitely at 5700 NIFTY if not at 5800 levels which is currently trading around 5844 levels – this on account of –

The slide on account of cutting losses by Short term buyers who bought around NIFTY-6000 or + LEVELS & squaring of Oversold position by buying again into market at relatively lower levels to profit from same post Budget.

Generous Call: Its high time going forward to replace your Bank Fixed Deposit with Pure Debt Funds which is relative safe & delivering better Post Tax returns with instant liquidity features for investment tenure of six months onwards....

Savings rate to dip to 30% this fiscal: India Ratings

India Ratings today warned that the national savings rate will slip further to 30 per cent or so this fiscal, from 30.8 per cent of the GDP last fiscal, if the advance estimates of national income is anything to go by.

RAJIVE GANDHI EQUITY SAVINGS SCHEME relief under section 80CCG

Only thru RGESS you can do additional tax savings (over & above 100000) on Rs. 25000/-, - Only for those files which has Gross Annual Income less than 10,00,000/- & have never traded in shares/bonds in secondary Market via DMAT account prior to 22nd November 2012.

PARADIGUM SHIFT

The year 2013 would be seeing cut in RBI rate, which will be reflected in Bank Deposit Interest rates (including other fixed interest products) getting reduced by 1% - 1.50%. This phenomenon as always makes Debt Fund quite attractive as their portfolio yields are inversely proportion to interest rate. Whatever rates you get from the bank – the same rates ARE delivered by these Funds as TAX FREE FOR YOU (without any equity participation). Almost 15 years of track record spells this.

Inflation would be more or less within manageable range of 6.00% to 8.00%. Fiscal deficit should be less than 5.40% of GDP if not equivalent to 5.10% of last year. Going forward various policy reforms announced (and some more to be announced) should beer fruits in reducing fiscal deficit in FIN YR.2013-14 and improving GDP performances.

The entire impact should make equity market friendly, however volatility is not ruled out. We only hope that Indian retail investor should not repeat their 2012 behaviour – where- by on one hand we saw Foreign Institutional Investors pumping money to tune of 1.35  Lakh core into Indian equity market however Indian retail investor participation stood in red with 25K crore. We are repeatedly maintaining, to participate in this market at every lows OR through SIP’s and don’t liquidate positions before seeing nifty at 6400. May be by that level opinion get changed altogether.

Fiscal adjustment in US, ramification of Euro zone crisis and China‘s slowing rate of sustainable growth is a factor that is likely to curb global growth in 2013. Having said that the latest estimates from the International Monetary Fund project developed economies as a whole to have achieved GDP growth of only 1.3% in 2012, with growth expected at 1.5% in 2013. In contrast, emerging Asia is expected to post an estimated GDP growth of 6.1% in 2012 and 6.8% in 2013.

What all happens in U.S., Euro zone, and Japan this year will almost impact the global economy at large, but the ebb and flow of action and reaction is shifting. Emerging markets, for instance, are generally lessening their trade dependence on the U.S. and Europe, and there are other countries that can drive global growth. In addition, a likely continuation of easy monetary policies in the developed markets this year could result in more investment dollars into global equity markets including emerging markets.

A VERY HAPPY NEW YEAR TO ALL

Smile because your assets are set to appreciate going forward.

Be it Equities, Debt, Bond or Gold, these asset class are set to see new height for their own different intrinsic reasons. This is rare phenomenon– Pl. doesn’t miss it. – The only criterion to select Asset Class is the period for which you want to invest, or remain invested.

For God sake at-least don’t liquidate your holdings, as it will over all improve it valuations in months to come. You can however reposition your holdings in to better performing Funds/Asset class of your liking.

The long term investor should participate in equities (preferably through Mutual Funds) with every fall in index (Though there may not be many) or even at current levels further and or should start thinking to spice up SIP (Systematic Investment Plan).

How-ever, those who are already exposed to equities or don’t have time horizon in their favor, could at-least, capitalize the current opportunity by planing all/possible Tax Savings under sec 80 C into MF Tax Savings schemes instead of other options available, also defined at www.i2isolutions.org/tax_savings.htm

Those who love making Fixed Deposit with Bank, but are in highest Tax slab, it is high time to diversify a bit by having exposure into debt Funds (which has nothing to do with stock market as there is no exposure to equity market in the portfolio) it will at least deliver minimum 30% (on the lowest side) more Tax free returns than good old Bank FD’s.

Gold, after consolidation at current level is looking set to surge in north direction – It’s advisable to diversify your portfolio by having some exposure into Gold Fund which when required can be instantly liquidated delivering the appreciation of Gold in holding period.

Happy Investing