Skip to main content

Investment Strategy after the Budget 2011

A touch of gold, and some good infra and agri stocks may do a world of good to your portfolio


   For all its sheer unpredictability, the stock market can be highly predictable. And the budget is one such occasion when the market behaved in an expected manner. In the run-up to the budget, investors (or rather speculators) start building up positions in stocks which they think will benefit from some sundry announcements. However, this year was an exception. Thanks to disparate scams that were hogging the headlines in the local media and the rise in price of crude on account of the unrest in the Arab world, the pre-budget rally was a no-show this time. Going into the budget session this year, the markets were extremely light and there were virtually no expectations from the budget given the fact that there were too many other factors floating in the market. However, after the budget the story was different: the market has been rallying since last Monday. Budget 2011-12 is more of a balanced budget contrary to expectations of a populist one.

MARKET'S REACTION TO THE BUDGET

One of the major worries with foreign investors is on account of higher fiscal deficit. The figures released by the finance minister Pranab Mukherjee have relieved many investors in this regard. The budget claimed that fiscal deficit was down to 5.1% of the GDP against the targeted 5.5% and would further decline to about 4.6% against the 4.8% mapped out earlier. Of course, part of the reason for the lower fiscal deficit is on account of the 3G spectrum announcement of around . 65,000 crore, and the successful disinvestment programme. However, whether the feat can be repeated in 2011-2012 remains to be seen. Moreover, not many are optimistic about PSU disinvestment due to lacklustre stock markets. Morgan Stanley says in a research report: "We believe the headline central government fiscal deficit for FY12 will be 5.2-5.4% of GDP, compared with the Budget estimate of 4.6%".


Though it looks ambitious, what investors really would be looking at is a fall in fiscal deficit year-on-year, which is possible. Many in the market feel that these figures are optimistic and feel that there is no certainty that it will happen. The fact is that things are moving in the positive direction.


Another important announcement in the budget was the setting up of a committee under Unique Identification Authority of India (UIDAI) chief Nandan Nilekani to suggest measures to implement the proposed shift from physical subsidies to cash transfers. UIDAI has the ambitious task of opening 10 lakh UID accounts every month, which will make it possible by 2012 to transfer cash directly. This is expected to reduce leakages considerably and help reduce fiscal deficit. A road map has been laid for the implementation of GST and DTC, which is a big positive. Initiatives have been taken on the food front too. The finance minister has realised that food inflation is more on account of supply-side constraints and, hence, the focus is now on improving logistics and cold chains across the country.

GOING FORWARD

The Bombay Stock Exchange (BSE) Sensitive Index (Sensex) has taken a positive cue from the budget, and has been on an upswing since February 28. Since the announcement of the budget, the Sensex has gained 786 points or 4.44%. Clearly this is not a time to sell. With the markets trading at 14 times forward earnings, investors should stay put. However, as far as fresh equity investments are concerned, he advises investors to buy slowly. There are a lot of uncertainties surrounding the market in the near term. Also, he advises investors to allocate 10% of their portfolio to gold. And, on the debt side, retail investors could also look at fixed maturity plans as the returns from such products could be in double digits.


As of now, oil is a major concern for investors. With the Arab crisis, having spread to Libya, the situation is quite fluid and no one knows when and how it could end. According to a Citigroup report, a $1-per-barrel rise in global oil prices will widen India's trade deficit by $700 million, or 0.04% of gross domestic product (GDP). With state elections around the corner, the government is unable to pass on this rise to consumers. According to a research note by Edelweiss Capital, diesel underrecoveries are at . 10.3 a litre. While LPG under-recoveries averaged 286/cylinder, kerosene under-recoveries were at 10.7 a litre. In addition, to this inflation shows no signs of cooling.


This has led to a rise in lending rates and is threatening to curtail growth. It is impossible for retail investors to time the markets, and definitely you should invest about 60% of your money now, while the rest could flow in on declines.


FIIs have shied away on account of these factors and with chances of recovery in Europe and the US, they would prefer parking their money there. On the domestic front, too, issues like governance deficit and corruption seem to worry investors. However, the economy could still maintain an 8% growth rate.


She advises investment in infrastructure and agriculture as they could be major beneficiaries in the coming years. "Investors can invest from a three-year perspective, and use every dip in the market as an opportunity to buy.


Stick to their asset allocation at all given points of time. He advises every investor to build a financial plan for himself. This could be done by taking into account various factors such as age, number of dependents, risk profile, existing financial investments and goals in mind. Once that is done, an investor could arrive at an asset allocation for himself. Asset allocation, means allocating your money across various asset classes such as equities, debt, real estate and gold. So, typically, a moderate risk profile investor could have a 60% exposure to equities, 30% to debt and 10% to gold. Investors can build their equity portfolio using SIPs over a long period of time.

 

Popular posts from this blog

Post Office Deposits Interest Rates

Best SIP Funds to Invest Online   SIPs are Best Investments when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further information on Top SIP Mutual Funds contact  Save Tax Get Rich on 94 8300 8300 OR You can write to us at Invest [at] SaveTaxGetRich [dot] Com

HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300     HDFC Capital Protection Oriented Fund – Series II 36M May 2014 NFO will be open for subscription from 16th May 2014 to 30th May 2014. The key features of the scheme are as mentioned below:   Type of Scheme A Close Ended Capital Protection Oriented Income Scheme Benchmark Crisil MIP Blended Index Fund Manager Mr. Anil Bamboli , Mr. Vinay R Kulkarni & Mr. Rakesh Vyas New Fund Offer (NFO) Period 16 th May 2014 to 30 th May 2014. Minimum Application Amount Rs. 5000 and in multiples of Rs.10 thereafter Plans/ Options Offered Growth and Dividend Payout Facility Liquidity To be listed For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

How to PPF Account extension after maturity

A PPF account can be retained after maturity without making any further deposits. The balance will continue to earn interest till it is closed. Public provident fund or PPF remains one of the most popular savings options for the long term despite a gradual decline in interest rates over the years. PPF accounts have a maturity period of 15 years and they can be extended. If there is no fund requirement, financial planners say, PPF account holders should extend the account beyond 15 years. In terms of income tax implications, PPF accounts enjoy the benefit of EEE (exempt-exempt-exempt) status . Under Section 80C, contribution up to Rs 1.5 lakh in a financial year qualifies for income tax deduction. The interest earned and maturity proceeds are also tax free. What are your options when a PPF account matures? 1) A PPF account can be closed after the expiry of 15 financial years from the end of the year in which the account was opened. 2) The subscriber can retain his

SUNDARAM SELECT MIDCAP

Best SIP Funds Online   SUNDARAM SELECT MIDCAP is a mid-cap focused fund has shown remarkable consistency in outperforming both its benchmark index and the category over many years. It takes a sharper tilt towards mid-caps compared to its peers. While the fund manager used to take large positions in his conviction picks, he has moderated exposure to his top bets over the past year. He has also chosen to stay away from capital guzzling businesses instead favouring those with efficient capital allocation practices. SUNDARAM SELECT MIDCAP fund boasts of a superior risk-reward profile compared to many of its peers, and while it has underper formed slightly over the past one year, its proven track record in the hands of a capable fund manager provides comfort. It remains a worthy pick in the midcap basket. SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich For further inform

HDFC Prudence Fund - Invest Online

Download Tax Saving Mutual Fund Application Forms Invest In Tax Saving Mutual Funds Online Buy Gold Mutual Funds Leave a missed Call on 94 8300 8300   HDFC Prudence Fund Balanced funds are excellent investment options for investors with moderate risk tolerance, since they give very good risk adjusted returns. It is very surprising why balanced funds are not nearly as popular as diversified equity funds, despite being around in India for nearly two decades. Balanced funds are essentially hybrid funds with both debt and equity in its portfolio mix, to balance the portfolio risk. These portfolios typically hold up to 70% of its portfolio assets in equities and the balance in fixed income. On a risk adjusted basis, balanced funds have delivered excellent returns compared to other equity fund categories, e.g. large cap or diversified equity mutual funds. The chart below shows a comparison of category returns between large
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now