Markets
BSE See NSE See 39,592.08
157.14 (0.4%)
collapse Related Readings collapse

Invest systematically and for the long-term

| 10/24/2011 11:48 AM Monday

By RAJAN KRISHNAN, CEO
Baroda Pioneer AMC


Challenging times’ are the words that, I feel, can best describe the current scenario. On the domestic front, we are passing through a higher interest rate regime, which, in turn, may negatively impact the earnings prospects of India Inc. One thing we must remember is that we live in a global village. Therefore, higher interest rates, coupled with the developments in Europe, are likely to have a negative impact on the markets. Despite a strong domestic economy, we are more susceptible to global events now than ever before. The concerns are mainly on two fronts; earnings and the debt crisis. We may see some respite with commodity prices coming down, but it cannot be denied that we are facing challenging times at present.

At this juncture, we are passing through the earnings season for Q2 FY12 and H1 FY12, and we may witness some pressure on company financials in this quarter, on the demand as well as on the cost side. Rising interest rates have surely played a dampening role. There are companies in sectors like the FMCG space who were able to pass on their costs to the consumers, and these may post better results as compared to others.

Now, if we look at the banking sec-tor, we can say that it has witnessed better earnings in the past. However, in the current scenario with rising interest rates, it may face some challenges on the treasury income side, and there will be pressure on the advances growth and on the net interest margins. I feel that there will be some pressure on the banking sector in this quarter. As a whole, it can be said that interest-sensitive stocks like automobiles are likely to face some strain. Investors can look at sectors that are less prone to higher interest rates, like telecom or IT.

One of the burning problems that we are facing today is that of higher inflation and interest rates. One is related to the other. Rising inflation has seen interest rates go up. The RBI believes that by hiking rising interest rates they will be able to diminish demand, and that will tame inflation. This definitely happens, but with a lag effect. It looks difficult to estimate that lag, and doing it on the demand side without the government working on the supply side does not make sense. We have 30 to 40 per cent wastage, and we are actually paying for the wastage. I think that there is a need to curb the demand side, but there is also a need to take a look at the supply side, whether for the infra-structure or better distribution.

Interest rates, on the other hand, are peaking out. The RBI may hike rates one more time in their next policy meet, but beyond that we have no idea. However, it is likely that the RBI takes a pause before hitting the reverse gear.

On the global front, it is clear that the focus is on Europe, and all eyes will be on them to see how they will deal with the crisis they are facing at this point of time. There has been a situation of political inertia in India, and any step by the government will act as a trigger for the markets going forward.

Looking at the present scenario, we are bullish on sectors like telecom, IT and consumer staples. I have always said that it is a good idea to invest for the long term and in a systematic way. One cannot deny the long-term benefits of equity. Therefore, look for SIPs in perpetuity, till the time you are able to spend. Invest when you can and withdraw when you need to.

 

Find More Articles on: DSIJ Magazine, Fund's Focus, Personal Finance, Mutual Funds, Product, Large Cap, PSU

news letter

More for the early bird.

Get the post-market reports and breakfast news right in your inbox. See latest »

DSIJ Mindshare

Ducon Infra partners with Sterling & Wilson to bid for large GFD projects

Apurva Joshi / Article rating: 5.0

Ducon Infratechnologies Limited has entered into a strategic tie-up with Sterling & Wilson Private Limited, a flagship group company of Shapoorji Pallonji Group, to jointly bid large-sized FGD tenders. Ducon is an emerging technology company providing solutions in the industrial, infrastructure and digital space to multiple business segments across varied industries.

12345678910Last

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Tiger Logistics topline to grow by 10%--buoyant over infra sector status to logistics sector

Logistics sector will play a vital role in making the concept of ‘Make in India’ a success. This will be further aided by some of the recent steps taken by Government of India such as granting of infra sector status to logistics sector.

Best and worst Performing Sector Funds of Year 2017

Best and worst Performing Sector Funds of Year 2017

As the year-end has approached most of you are eager to know the mutual fund movers and shakers of the year 2017. Read on to find the performance of various sector dedicated funds.

Markets may start positive, but volatility likely due to F&O expiry

Markets may start positive, but volatility likely due to F&O expiry

The start of the F&O expiry day is likely to be in the green, but volatility may creep in with the progress of the session. The SGX Nifty suggests that the Nifty could open at 10,525 with gains of 32 points at the opening bell. 

Pidilite announces buyback of Rs 500 crore

Pidilite announces buyback of Rs 500 crore

The buyback offer comprises purchase of up to 50,00,000 equity shares. The buyback offer size comprises 0.975 per cent of the total paid-up equity capital of the company.

Bank Nifty drags markets to close in the red

Bank Nifty drags markets to close in the red

The late session fall in Bank Nifty changed the direction of the market, leading to a marginal fall in the benchmark indices. Bank Nifty yet again resisted at its multiple point downward sloping trendline level at 25733.

Six major underperforming MF schemes having higher expense ratios

Six major underperforming MF schemes having higher expense ratios

Mutual funds with a large size of assets under management (AUMs) are supposed to have lower expense ratios. However, there are schemes with large AUMs but having higher expense ratios and generating lower returns. 

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma supports market; Sun Pharma at bullish reversal

Nifty Pharma index has come in as the healer in an otherwise sluggish market. Index has given a consolidation breakout at the 9420 level today and if the it sustains 9420, followed by 9628 on the upside, it has a long way to go.

Ten stocks close to their 52-week low

Ten stocks close to their 52-week low

Following stocks are close to their 52-week low as at 12.35 p.m. on December 27.

Ten stocks close to their 52-week high

Ten stocks close to their 52-week high

The markets on December 27 opened gap down. BSE Sensex is trading at 34,068.15, up by 57.54 points and the Nifty is trading at 10,539.45, up by 7.95 points.

Five stocks with selling interest

Five stocks with selling interest

Overall volumes in futures & options currently stand at 62.75 lakh contracts with a turnover of Rs. 5,19,204.72 crore.