Money. The raison d’etre of our labour. What will happen to it in 2005? Will it grow or be battered by rising prices? Will the stock markets crash? Will I pay more on my home loan. The Indian Express does not have a crystal ball, but we do have experts on tap who give us a fairly accurate peek into the future. Like all good soothsayers, we give broad money trends here and refrain from predicting the date of the market crash or boom. Some broad trends: “Inflation should be in the 4 to 5 per cent range in 2005” — Madan Sabnavis, Chief Economist & Head Knowledge Management NCDEX Inflation in 2005: If 2004 was the year of inflation worries, 2005 promises to be more benign. A high base effect (higher inflation numbers in 2004 will make price rise in some parts of 2005 look smaller), moderate oil prices, good agri-growth and nimble money management by the RBI should keep inflation in the 4 to 5 per cent range. “The interest rates will fall by about 50 basis points next year” — Surjeet Bhalla, MD, Oxus Fund Management Interest rates in 2005: 2004 was the year when the interest rate rise scared the borrowers, without adding much to the depositors’ bank balances. 2005 should see a reversal of this trend, as riding on the back of a falling inflation and enough liquidity in the market, interest rates should fall by about 50 basis points and settle between 6.5 and 7 per cent. This means that home loan rates would not rise further and new borrowers should go for a floater now. Existing borrowers will probably be better off holding onto what they have as the conversion costs are heavy. “The flow of money from abroad is strong, the market should keep rising another 100-200 points” — C. Jayaram, Executive Director, Kotak Mahindra Ban The stock market in 2005: 2004 saw a crash and a boom all in one year. 2005 should be no different. There is an upside of 15 to 20 per cent on the market, that means Sensex would close at 7,000 by 2005-end. But the year should also see sharp volatility. At the time of this article, the Sensex had touched an all time high of 6,500 and a correction looks imminent. Long-term retail investors should stay invested. Shorter-term players with more time and knowledge can use the volatility to make quick gains (or losses!). “The debt market could have a rally due to the base effect making for a lower inflation figure and a consequent decrease in interest rates” — N. Sethuram, CIO, SBI Mutual Fund The bond market in 2005: The bond market has an inverse relation to interest rates. If they fall, there is a rally in the bond market. Though the party in debt will not be a repeat of the 2003 binge, there will be a recovery in debt in 2005, as interest rates slide on the back of falling inflation. This is not the best time to go for floating rate debt products (that time was before the interest rate hike in 2004). A floater will not allow you to book capital gains on your debt paper. A plain vanilla bond fund is good for your debt asset allocation. “The price of bullion should swing by around 5 per cent across, both ways, from the current level of $440 per 10 gram” — Madan Sabnavis, Chief Economist & Head Knowledge Management NCDEX Gold in 2005: Gold and dollar are mirror images of one another, when one goes up, the other goes down. Dollar is linked to the state of the twin US deficits — fiscal and current — which are certainly not showing signs of getting any better. The dollar would continue to be under pressure in 2005, though there may not be a free fall as the Euro may not be able to take the full burden of the adjustment. Property in 2005: The property boom should spread to the next layer of cities, from the metropolitan centres of Delhi, Mumbai, Bangalore and Chennai. The relocation of the IT services companies to the tier two cities like Jaipur, Ahmedabad, Nasik, Mangalore and Chandigarh, along with the malls, hotels and leisure activity centres, will spread the property boom wider. ‘I definitely see a rise in demand, close to 15 per cent in 2005. A short-term paucity in supply may affect prices up to 10 per cent, but this will only be a temporary phase’’ — Chanakya Chakravarti, Joint MD, Cushman & Wakefield India
