Presentation on theme: "Mayday or May Day Time to take Emergency procedure or Celebrate the good time for investment? Investment Ideas (May 2012)"— Presentation transcript:
Mayday or May Day Time to take Emergency procedure or Celebrate the good time for investment? Investment Ideas (May 2012)
Indian Equity Market The benchmark BSE Sensex is roughly at the same level it was in April 2008 and is down close to 20% from its highs in January 2008. Even the recent higher-than- expected rate cut by the Reserve Bank of India (RBI) failed to lift sentiments in the face of unsupportive global environment, high inflation, higher oil prices, weak earnings growth and issues on the governance and policy front. While long-term investors need not worry already, near- to medium-term investors should watch out for five key triggers. 1. Earning & Valuations 2. Inflation & Interest Rates 3. Global Risk 4. Oil Prices 5. Regulatory & Policy Issue
Triggers to watch
Earning & Valuations On trailing basis, the BSE Sensex is quoting a price-earnings (P-E) multiple of about 17.60 times compared with the last five-year average of 19.64. Inflation & Interest Rates Even though RBI surprised the market with the 50 basis points rate cut, it didnt forget to underline that in the future rate cuts may be difficult. Global Risk After a temporary lull in global market turmoil in the first quarter of the calendar, the sovereign debt crisis in Europe is back in news again. Oil Prices Even though crude oil price have corrected a bit, it continues to remain a problem for India. The daily under-recovery for oil marketing companies as on 1 May 2012 stood at Rs. 518 crore. Regulatory & Policy Issues Regulatory and procedural risk has gone up significantly in recent timesbe it the telecom sector, natural resources or GAAR. Also, the issues related to governance and the slow pace of economic reforms is hurting sentiments.
What to expect With muted expectations on the overall earnings growth, development on the policy front will continue to drive the market. First, it is important that inflation comes down to create room for more rate cuts. Second, markets will keep an eye on the reforms front. For example, the inability to control expenditure may further hurt confidence in the market. Market should move in a tight range for next 3 – 6 months
Value Averaging Value Averaging Investment Plan Value-averaging investment plan (VIP, in short) is a close cousin of the Systematic Investment Plan (SIP). The main difference between SIP and VIP is that in VIP the regular installment put into mutual funds is not constant but varies according to market conditions. If the sensex is high, you will be investing less but if the sensex is low you will be investing more. When should I go for VIP? When you believe the market on an average will grow during your investment duration Only when the market is volatile i.e. forming new crests and troughs every week or fortnightly When you are not money tight. Installments can vary from nil to the upper limit set by the investor
Value Averaging Advantages Times the market with varying monthly contributions Useful if you seek a certain amount of money over a certain period of time Not only reduces risk, but also offers investors reliable returns