India growth story is likely to continue

Let Einstein guide you in stock market PUNEET JAIN

The Economics Times MONDAY, DECEMBER 05, 2005

For equity investors in India there was never a more interesting time than the present. Never before has a market broken the previous peaks so many times within such a short span. We are now in completely uncharted territory and the only advice can be that investors must remain on their toes. Analysts brought up on a diet of past experiences and lifeless lines have been completely unable to decipher the mood of this market or its trajectory.

The key factor driving the market right now is the surge in global liquidity and flow of funds from debt to other assets like equities, gold and real estate. This is a worldwide phenomenon and rather inexplicable as rising interest rates were supposed to make debt more attractive. However, global investors continue to prefer other asset classes even though riskier. Also the huge shift in money from developed economies to developing economies on account of trade imbalances is creating consumption and economic growth in areas like China and India.

Therefore, one can safely conclude that the India growth story is likely to continue for a many more years. Therefore, the rally in stock markets can be seen as a structural bull market that would last many years and scale new heights. Given the global trend it appears that equities will remain very rewarding in India, however risk management becomes most important from now on.