In 2011 Nifty was down 43% in dollar terms and 24% in rupee terms. So 2012 was a kind of upward correction and markets recovered around 50% of what it lost in 2011. With rupee being expected to stay under pressure due to high fiscal and current account deficit, FIIs, who are the major players in our market, are not likely to gain much on currency. Also the developments in United States such as debt ceiling which needs to be resolved after years of monetary easing could also be a dampening factor as far as external liquidity is concerned.
Back in India monetary easing beyond 200 bps in 2013 seems unlikely considering the negative real rate of return on fixed deposits due to more than 9 percent of consumer inflation. Also the year being the last year of the present govt, the budgets could be somewhat populist and investors might want to stay light due to elections.
Beside fundamentals one more thing that raises my eyebrows is the positiveness built in the environment. Each and every analyst on the market seems bullish and expects market to make new high. This is where I think a little bit of bad news could break the knees of the market as people will rush to protect their profits they made in 2012.
So conclusively I am not that bearish but also not very bullish on the markets in general in 2013. However selectively individual stories would play out and would deliver good returns provided you do not chase rally and buy into them whenever correction happens.
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You are right Amit, 2013 might not be as good as 2012. There might not be major correction but significant upside beyond current level seems unlikely.
ReplyDeleteAs expected markets have come down significantly from 6100 Nifty level to 5700 with huge cracks in individual stocks. The expectation is now much tempered which is healthy for the markets in medium to longer term...
ReplyDeleteBest of Luck!