The Hindu Business Line : Market Outlook

We believe that such a correction is an inherent part of a growth market like India and it was widely anticipated, given that the strong run-up in prices had pushed valuations above long-term averages. While one cannot rule out further volatility in the markets, investors with a long-term horizon have nothing to worry given the strong fundamentals on the economic and corporate fronts.

Corporate India is likely to experience healthy earnings growth arising from multiple drivers, such as robust domestic consumption on the back of rising income levels, increased opportunities due to offshoring in various sectors, government's infrastructure and rural spending and the current uptrend in the capex cycle.

Corporate India's ROE is among the highest in its peer group and companies here are better-placed than their other Asian counterparts to weather global upheavals, given that they don't rely excessively on external demand as a source of growth. The recent decline in commodity prices may also ease input cost pressures on companies. On the reforms front, while the pace of reforms has been mixed due to the coalition nature of the government, we continue to believe that the overall direction is likely to be positive.

We believe the breadth and depth of the Indian stock market will provide long-term investment opportunities for bottom-up and fundamental investors like us. The recent corrective phase has brought valuations of Indian stocks to more reasonable levels than in the recent past, enhancing the return potential for long-term investors who take exposures to the equity market at current market levels.

We continue to believe that carefully selected portfolio of stocks, in the Indian context, can deliver investment returns of 12-15 per cent for investors who stay invested for at least a five-year period. For retail investors in equity funds, the recent volatility re-emphasises the need to focus on the time-tested and simple tenets of successful investing: Chart out a financial plan based on your goals, time-frame and risk preferences and don't let short-term market movements affect your long-term plans. A simple but effective way to reduce the impact of volatility on your long-term investments is to use the systematic investing route.

Franklin Templeton Investments

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