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In the month gone by Foreign Institutional Investors (FIIs) bought aggressively in the Indian equity markets, net to the tune of staggering Rs 10,358 crore. The FII sentiment was buoyed by the recent announcement by the Government to allow Qualified Foreign Investors (QFIs) to directly invest in the Indian equity market which came in on the backdrop of significant foreign capital outflows from the domestic equity market in recent times. Furthermore, the U.S. Federal Reserve's commitment to keep interest rates low till late 2014 also boosted sentiment.
BSE Sensex gained 10.8% in the month of January 2012
(Source: ACE MF, PersonalFN Research)
Thus taking cue from the upbeat FII sentiments, the BSE Sensex rose to 17,000 levels from 15,000 levels thus, gaining 10.8% in the month of January 2012. Also, with RBI ushering liquidity by reducing the CRR by 50 basis points in its third quarter monetary policy review held on January 24, 2012, also helped the Indian equity markets to pave an up-move .
We believe that the fundamentals of the Indian economy look robust, with WPI inflation too near the comfort range of RBI, and also near to the year-end target of 7.00%. Similarly, industrial activity has revealed an uptick for the November 2011 data, after a sharp decline in October 2011. Thus with intermediate economic data being upbeat, a favourable environment for investment is experienced which is enthusing FIIs to invest in India. However, for long-term economic progress to take place in our country, the Government in power should focus on elevating FDI participation. It is noteworthy that mere increase in FII participation may not help, because they (FIIs) are like migratory birds and may flock in elsewhere when the investment sentiments in our country are grim.
Since Euro zone uncertainty still prevails, we think investors should adopt a staggered investment approach in equity asset class and may adopt the mutual fund investment route if one lacks the expertise to pick the right kind of stocks at the right price.
Remember to invest in diversified equity mutual funds which have a good track record and are from a fund house following prudent investment processes and systems. Also, the investment time horizon should be atleast 3 years to 5 years to benefit from the equity asset class. | | Impact 
Fidelity Mutual Fund, a renowned name in the mutual fund industry which had setup its business in India in 2004 is now in search for a buyer to sell its India asset management company better known as FIL Fund Management Private Limited (FFMPL).
The performance of its funds especially equity funds have been quite decent since their inception. The table below depicts, how various categories of mutual fund schemes from the stable of Fidelity Mutual Fund, have performed vis-a-vis to their benchmark - BSE 200.
So far, as revealed above, most of them have outperformed the returns generated by their benchmark index across time frames, while some of them have even managed to be amongst the top performers in the category too. So, then what went wrong with Fidelity which provoked them to take a drastic step.
To know that click here and read more.
| | | | Weekly Facts |
| Close | Change | %Change | | BSE Sensex* | 17,604.96 | 371.0  | 2.15% | | Re/US$ | 49.16 | 0.9 | 1.89% | | Gold Rs/10g | 28,115.00 | 845.0 | -3.10% | | Crude ($/barrel) | 110.58 | 1.3 | 1.16% | | FD Rates (1-Yr) | 7.25% - 9.40% | Weekly change as on February 02, 2012,
*BSE Sensex as on February 03, 2012. | | | | This Week's Poll !!!
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In an interview with the Business Standard, Mr V. Shankar – Group Executive Director of Standard Chartered Bank shared his views on the on-going Euro zone crisis and its impact on India.
Mr Shankar believes that the current crisis is different than the one that emerged in 2008. “The current one is sovereign, with a second-order impact on banks. Also, the regulations that are being imposed are actually constraining banks from lending — both in terms of capital levels and also from the point of liquidity buffers that banks need to carry. A banking crisis is relatively easier to resolve. You pump in more liquidity in the system, banks begin to lend, you inject capital in a few banks, and life moves on. But now, in Europe, banks are in trouble because they have a large percentage of their balance sheet, as required by regulation, in sovereign bonds. The countries are going through stress and as a result the bonds are getting battered. This means your capital levels are getting deflated and you have to go to the same bankrupt creditor to pick up more capital. In that sense, it is tougher because unless the West puts its economies in a more sound financial footing, the problems are unlikely to be resolved,” he explained.
As far as the impact of current crisis on India is concerned, Mr Shankar is of the opinion that India will be impacted, because Europe is a major trading partner. He added that if there is a contraction in the European economies, there will be an impact on India. “In terms of financial sector, 30-50% of dollar value of loan syndications internationally still comes from European banks. If European banks suffer from liquidity or capital, then it could impact the dollar funding for the Indian corporate sector,” he said.
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Qualified Foreign Buyer: Qualified Foreign Investor (QFI) shall mean a person resident in a country that is compliant with Financial Action Task Force (FATF) standards and that is a signatory to International Organization of Securities Commission's (IOSCO’s) Multilateral Memorandum of Understanding (MMOU).
(Source: SEBI) | |
QUOTE OF THE WEEK
"Becoming wealthy is not a matter of how much you earn, who your parents are, or what you do... it is a matter of managing your money properly."
- Noel Whittaker | | |