Fasten your seatbelts, bumpy ride ahead

The stock market is going to be volatile in the next few months and the market index may slip down sharply before showing a steady upward trend line. It is worrying when the market gains 100 points one day, only to lose 75 of those the next. The one thing to remember during all these movements is that the Indian economy is growing strongly and the stock markets are a reflection of the anticipated growth in a market. In fact, just recently, the International Monetary Fund IMF has upgraded its forecast of India8217;s gross domestic product growth for 2003-04 to 7.5 per cent. Its earlier projection was 7 per cent. Better still, this growth estimate is made with an upward bias, just below China at 7.5 per cent and has been made on the basis of the sound economic fundamentals, continuation of the external sector reforms and capital account convertibility.

The IMF report is only another pointer in the general direction: India is growing faster than before. This growth will be reflected in the markets, so do not get afraid of the short term swings in the market. Volatility is good for the speculators who stand to make money out of the market swings, but is poison to small investors or investors who do not want to churn portfolios too much. The only thing to do is to hold on to fundamentally strong shares, do not sell in a panic when the market is down.

No cuts in the small savings rate
The rates on the government assured small savings instruments like the Public Provident Fund, the Monthly Income Scheme amongst others, will stay at their current levels. The market has been predicting a fall in these rates since these are higher than the real interest rates in the market today. Seen as a subsidy to the middle-class, these high returns do not come with the higher risk that such a return should bring. These rates will ultimately fall and it is a good idea to lock yourself in today for as long as possible.

Happy days are here again
The eighth annual India Salary Increase Survey carried out by global human resources outsourcing and consulting firm Hewitt Associates says that India8217;s employees can look forward to a more prosperous 2004 since the average salary increases will range from 9.7 per cent to 13.4 per cent across all employee groups. These findings are based on 521 foreign owned, locally owned, and joint venture organisations across 23 industries representing about 650,000 employees polled between November 2003 and January 2004. Remember to invest a part of your big raise this year!