The Hindu Business Line : Market View

With emerging markets such as India registering blockbuster returns for an unprecedented fourth year in a row, many investors are sceptical of the good times continuing to roll in 2007. The sharp correction in the market during the first few trading days of the New Year only added to concerns over the longevity of the bull trend. While we won't be surprised to see equity market take a pause to refresh itself, we still believe the bull market is in a mid-cycle stage.

In post-World War II history, the global economy has followed a rather standard growth pattern. The first half of a decade has witnessed a recovery, aided by accommodative central bank policies. As resource utilisation levels get stretched by the middle of the decade, central banks switch to monetary tightening that leads to some sort of a mid-cycle correction. Once the policy normalisation process is complete, economies and asset classes with strong underlying fundamentals resume their ascent, eventually reaching a bubble-type stage. To be sure, there are enough cynics who argue that cycles are shortening and, as a result, many different asset classes can't keep compounding returns year after year at the current frenetic pace. While there will undoubtedly be more differentiation in the return profile in 2007 there is little to suggest that the broad uptrend in emerging markets is reaching the final stage.

Morgan Stanley Growth Fund

Strong economic data along with a buoyant equity market appear to have given a boost to Corporate India's confidence levels. The NCAER's Business Confidence Index (BCI) for the quarter ending January 07 rose by 3.1 per cent compared to the previous quarter to register a 3.9 per cent annual growth and is slightly lower than the lifetime high of May 1994. In terms of individual components, the rise in expectations on overall economic conditions and a positive investment climate was relatively higher than the current or micro criteria — future financial position and present capacity utilisation.

Franklin Templeton Investments

We expect the RBI to cut the SLR to 20 per cent from 25 per cent over the next 9-12 months. The SLR ratio excluding top three banks is already down to 27 per cent and there is a need to bring down the SLR. In the near term (till March 2007) the RBI is likely to maintain SLR at 25 per cent in order to slow down credit growth. But with the fiscal deficit continuously coming down and expected to reach 3.4 per cent of GDP in FY2007-08 and 3 per cent of GDP (as per FRBM Act) by FY2008-09, the issuance of G-Secs is likely to decline over the medium term. Also with insurance companies' corpus increasing sharply over the last few years, the demand for long G-Secs has been steadily rising which also matches with the government's aspirations of elongating the maturity profile of its debt.

HSBC Mutual Fund

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