Your Money Matters

If the market were to rise again by 60 per cent, Sensex would have to hit 8,000. Thiswould require the economy to grow at 8.5 per cent, for this, the industrial production would have to double from the current level, interest rates to drop by another two or three percentage points and inflation fall to two per cent levels. All this seems unlikely.

Therefore, be satisfied with another 15 to 20 per cent appreciation in equity in 2004. The current favourites like banking, pharma, auto and tech sector will remain in the limelight. If you are not a direct equity investor, look at equity mutual funds to participate in the bull run. Diversified equity and index funds will be good instruments to get returns linked to overall market performance. Go to sector funds only if you can take the risk. Remember that mutual fund schemes only reflect the gains or losses in the underlying securities they buy, so don’t expect to double your money this year.

George Mathew

PGR Prasad
Managing Director, SBI Mutual Fund

The new year looks promising, the overall outlook looks bright in view of the strong fundamentals of the economy. The economy is firing on all engines and we expect that most sectors to do well. We are bullish on auto as easy availability of loans will increase auto sales. Pharma should give good returns in the long run. IT looks good. Pick funds if you cannot go direct.

Raamdeo Agarwal
Joint MD, Motilal Oswal Securities

While 2003 was a good year for investors, I’m optimistic about 2004 also. Though, do not expect more than 10 to 15 per cent gains this year. The economy is strong, interest rates are likely to be benign and corporate earnings are expected to improve. I’m optimistic about sectors like banking, retailing, two-wheelers and some companies in the pharma sector.

Gold 2004. All that glitters is gold

There’s just no stopping the yellow metal Indians love so much. After having touched all-time high levels of over US $400 per 10 grams in 2003, experts unanimously say gold prices will be heading upwards for some time now. Till when it will rise and at what level will it peak, is open to debate, because nobody can predict a high, but the back-of-the-mind figure is not less than US $500 per 10 grams that should be reached in 2004.

So if you have old gold jewellery which you haven’t used for ages, don’t sell yet. Wait till gold price crosses $450 per 10 grams, at least. Fresh buying is for those who like risk. If you are holding, then keep it safe as better days for selling will come later in 2004.

Shefali Anand

Sunil Ramrakhiani
Manager, National Commodities and Derivatives Exchange

Gold prices are going to touch $450 per 10 grams within the next few months. Having crossed the psychological support level of $400, the prices are moving up very fast. Investors should diversify their portfolios to include some of the yellow metal in it. Sell when prices touch $500 level. (The views expressed here are personal and not that of the exchange)

Sanjay Kothari
Chairman, Gems and Jewellery Export Promotion Council

Prices should touch between $400 to $ 420 by January-February. One of the reasons driving this hike will be the pre-Christmas demand. Overall the jewellery demand in the international market is going up and the chances of reduction are bleak. At present, gold is the best investment option since even the stock market is at its high. Those possessing gold should hold on to it, unless they can find a better alternate avenue.

Small savings 2004. The big change in risk free investing

The party is getting over and you should begin to see the picture on the wall this year even more starkly. There is no way the Government can continue to give unrealistic rates of return to a privileged few in the country. Not only does it distort the investment decision, it puts a cost on the government funds that it is no longer willing to bear.

Rates will surely come down this year and will get aligned to market determined rates of return finally, rather than rates decided by the politician-bureaucrat Godfathers. Short term strategy: get locked into the high rates offered today, choose instruments like the NSC and recurring deposits that offer the same rate for the next five to six years. Medium term: begin to get comfortable with taking risk yourself and understand instruments like equity and debt. If you don’t understand direct equity investing, understand how mutual funds work – they are the best instruments for the unaware equity investor. Long term: you are in charge of your own financial life, you will need to make an asset allocation that uses equity, debt and small savings in the proportion that suits your goal set and risk profile. This is the way the market is going, better to do now what you will be forced to do later.

Monika Halan

Mahesh Vyas
MD and CEO, CMIE

Rates may not go down this year, but will the next year. Do two things. One, get locked into the higher rates on offer today. Two, learn to deal with risk. Allocate a part of your portfolio to riskier equity, which can now be done through mutual funds.

Surjeet Bhalla
Managing Director, Oxus Fund Management

The ‘scam’ savings rate will come by 1 per cent. It is a good idea for the risk-averse investor to get locked into these artificially created rates today. Look at the stability of the equity market, compare returns and switch.

Home loans 2004. Get fixed now!

As individual consumers holds their breath for more cuts in home loan rates, Union Bank has already fired the first salvo by raising its rates. 2003 saw significant rate cuts in this market, with one bank offering as low as 6.5 per cent interest, in an effort to grab the growing home loan finance market. Where ‘loan switching’ has been anathema for older housing finance companies like HDFC, it has been the buzzword for private banks entering the fray. But by end of 2003, industry veterans reiterated that interest rates have bottomed out. In 2004, you may expect stray rate cuts by a newcomer wanting to grab customer attention. Unless you’re willing to wait indefinitely for this possibility, go for a fixed interest home loan at present. And if you’re still paying anything over 8 per cent for a home loan you took years ago, consider switching to a lower rate. Take care of costs, though.

Shefali Anand

Chanda Kochhar
Executive Director, ICICI Bank

The interest rates have bottomed out and do not expect any major change in interest rates in the medium-term.

Fixed and floating rates have little differece currently, and you should choose according to the risk you can take. Fixed are for risk-averse, floating for risk-happy. If you want to switch, home loans being long term and of high-value loans, even a 50 basis points difference in the interest rate helps, but work out the costs before you do.

S C Jain
Director and Chief Executive, LIC Housing Finance

All macro elements suggest that home loan rates have reached their lowest. While the possibility of a small cut in rates, more guided by competitive pressures than any substantive consideration, cannot be entirely ruled out, on the whole, a long -term borrower would be better advised to opt for a fixed rate. Specially now that even fixed rates are at an all-time low now.

Interest – inflation 2004. Staying steady on the interest-inflation see-saw

Interest rates and inflation rates usually follow each other closely. The challenge for the fixed-interest investor is to keep his investments ahead of inflation because inflation eats out purchasing power. Currently, with inflation at about 5 per cent, returns from a one year deposit are not earning any real return. 2004 is going to be no different. If you want returns that stay ahead of inflation, you may need to move out of the fixed deposit paradigm and maybe look at floating rate funds or debt mutual funds that carry low risk and may give higher return.

Do not get locked into a long-term fixed deposits at current levels as the current return rates are at rock-bottom and inflation threatens to rise. Globally commodity prices are rising which should lead to higher manufacturing inflation. This means significant toning down of return expectations for the next year. Inflation rates were rising through the last few weeks, are expected to remain below the 5.5 per cent range. Consumer price index will continue to remain at higher levels than WPI at around eight to nine per cent.

Dev Chatterjee

Y V Reddy
Governor, RBI

Inflation appears to be going up but there is no cause for any concern. We are confident that inflation will be as per the original projection in 2004, that is 4 to 4.5 per cent with a downward bias.

A K Purwar
Chairman, SBI

I am a strong advocate of stability in interest rates with a soft bias. In line with the global trends, the soft interest bias will continue in India as well in the next year, I see no reason for a change in this.

Real estate 2004. The buzz about the hot areas in the growth cities

The perception of real estate is changing – from a one-time roof-over-my-head to a long term asset class. Fuelled by low home loan rates and a desire to own solid assets, more people have and will continue to invest in real estate. Thanks to the ITES-BPO and the retail boom, commercial real estate has maintained high rates of return. The cheap home-loan rates are fuelling a residential home buzz too.

In Mumbai look at the Western suburbs of Andheri (E) and Goregaon-Malad (W). Central suburbs of Ghatkopar and Powai look good. Malad is the most preferred destination for ITES companies. Navi Mumbai is another emerging market. South Mumbai, Nariman Point and Fort will see a decline.

In Delhi look at areas in and around Westend, Golf Links, Amrita Shergill Marg, Chanakya Puri, Vasant Vihar, Shanti Niketan, Westend, Defence Colony and Jor Bagh The real buzz is in the suburbs of Noida and Gurgaon. Gurgaon due to the BPO activity and NOIDA due to institutions and good link roads.

Pune, another hot BPO destination, will see value growth in Alyaninagar, Hadapsur and along the Sholapur road. Its proximity to Mumbai adds to its value. Areas like Camp, Bundh, Garden Road and Deccan Road will continue to be attractive.

Arundhati Bakshi-Dighe

Pranay Vakil
Chairman, Knight Frank

The new year will see a real estate boom riding the death of the speculators and the birth of the real buyer. Now the investor is looking at real estate more from the point of view of an asset class. We will see increased activity in and around areas with big malls coming up. There is lot of activity along the Sholapur road in Pune. Surburbs in Mumbai are very active.

Chanakya Chakravarty
Executive Director, Cushman and Wakefield (India)

Growth in the new year will be fuelled largely by the ITES-BPO segment, as seen in 2003 too. Both commercial and residential segments will prosper. Growth will happen desspite a correction in home loan rates. Cities to watch out are Mumbai, Pune, Hyderabad, Chennai and Bangalore.