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Thursday, September 8, 2011

India - Ready for Decade of Bull Run

An unprecedented boom in the stock market, combined with the ease of investing in stocks, led to a sharp increase in public participation in securities markets in last two decades since 1990s . The annual trading volume on the Bombay Stock Exchange soared significantly.

Public participation in the market has been greatly facilitated by mutual funds, which collect money from individuals and invest it on their behalf in varied portfolios of stocks. Mutual funds enable small investors, who may not feel qualified or have the time to choose among thousands of individual stocks, to have their money invested by professionals. And because mutual funds hold diversified groups of stocks, they shelter investors somewhat from the sharp swings that can occur in the value of individual shares.

There are dozens of kinds of mutual funds, each designed to meet the needs and preferences of different kinds of investors. Some funds seek to realize current income, while others aim for long-term capital appreciation. Some invest conservatively, while others take bigger chances in hopes of realizing greater gains.

Attracted by healthy returns and the wide array of choices, Indians invested substantial sums in mutual funds in last one decade, but it is still too low if compared with developed countries.

When entire global markets are trading at single digit PE multiple. India is the country which enjoys premium, trading at PE multiple of 14. The main reason is India growth story which is intact @ 8% despite global turmoil, punchured GDP in west, high interest rates and inflation. When interest rate softens, we can see India GDP to move up to 9.5-10%. This can be achieved in FY 2013-2014 and India can be one of the most favourite destination for equity investors to park their funds.

We believe this is the decade of India in terms of Equity investments. For developed countries like US and Japan, old investors have already experienced the full decade of bull run but for country like India it has yet to come.

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