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Potential Investment Avenues

Mr. C.S. Sudheer | Posted On Saturday, June 21,2008, 10:11 AM

Potential Investment Avenues



Eye will be on infrastructure, energy and financial services

The stock markets witnessed a phenomenal growth in the year 2007. However, with a difference, it moved along with major reforms introducing by the market regulator, Securities and Exchange Board of India (SEBI). The markets learned to adjust with the regulator, leaving no room for any flyby-night operators. Further, the market also expects a buoyant year in 2008, even while maintaining an orderly growth. Here is a brief insight in to the markets and its movements, which will play a major role in the year 2008.

Slew of measures

The major announcements which will have a positive and strong impact on the markets in the coming year are: Real Estate Investment Trusts (REITs) to be allowed to invest in stock markets by early next year; amendment to the Indians Trust act, 1982, will be moved in the next session of parliament; PFRDA, the pension regulator, cleared the way for investing up to 15 per cent of the retirement money of central and state government employees in stock markets; short-selling by institution along with the launch of a securities Lending and Borrowing scheme (expected to commence early next year); seven new derivative products to be launched by NSE and BSE next month; curb on the issuance of participatory Notes (P-Notes); and mutual funds can invest aboard up to $5 billion now. Further, the Reserve Bank of India's decision to permit resident individual to remit up to $200,000 under the LRS from the earlier $100,000 also will have a positive impact.

The stock markets witnessed an unprecedented bull run in 2007. The markets saw the emergence of the real estate and financial services sectors. We believe that 2008 is going to be a phenomenal year for the retail sector, especially rural retail. And there would be a lot of action on the microfinance sector. For the investors looking to play the long-term India growth story, we would advise them to look closely at stocks in the infrastructure and engineering, energy, banking and financial services, food (dominated by select MNCs today), healthcare and the logistics sectors over the next two years. The markets may not fetch the returns seen in 2007.

Foreign fund flow

The headroom in terms of the serviceable population in India for financial services is enormously large. Rising crude prices and rupee appreciation may be the dampeners, but overall, the flow of money into India from global players does not look to slow down. The confidence stems from the fact that India's growth is domestic-led. This would remain so far the next year and a half.

The early part of 2008 is likely to be reasonably robust on the back of fresh foreign inflow and good corporate results. The second half may be more challenging because of over-riding concerns on U.S slowdown as well as elections in both India and the U.S. The measures taken by the regulators are in the right direction and will broaden and deepen the market. However, they need to ensure that regulatory delays do not slowdown fund flows. The frontline indices will not increase beyond 15 per cent in 2008. From April 2007 till the end of the year, the indices have shown a growth rate of 55 per cent.

The benchmark BSE 30 share Sensex closed at 20206.95 on December 28, 2007, against 13786.91 on December 29, 2006. The year's low was 12316.10 on March 16 and the high was 20498.11 on December 13. The year-on-year growth was 46.6 per cent. The 50-share NSE Nifty per cent as it rose to 6079.70 on December 29, 2006, It also recorded a high of 6185.45 on December 23, 2007, and a low of 3554.50 on March 5. The net FII inflow in 2007 was Rs69,401.50 crore against Rs. 36,539.70 crore.


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