Deteriorating Indian rupee and persistent signs of slowdown in the domestic economy saw Indian markets decline 4 percent last week. While Swapnil Suvarna expects the domestic markets to stay weak, he recommends that your long term investors should continue investing through SIP in equity funds, irrespective of the short term events.
As expected, the Indian markets declined last week by 4 percent led by the concerns of deteriorating Indian rupee and persistent signs of slowdown in the domestic economy. The Sensex and Nifty closed at 15,491 and 4,652 declining 722 and 215 points respectively.
The week started off on a negative note following dismal industrial production in October 2011. Industrial production shrank 5.1% in October versus 11.3% growth in the same period a year earlier mainly due to rising interest rate, high prices and global uncertainties. The market sentiment was also hampered after Moody’s Investors Service said that measures announced at European Union Summit to allow a central European authority to oversee their future budgets won’t be enough to take pressure off euro-area sovereigns as it is in a critical and volatile stage.
The market mood further dampened after higher-than-expected inflation reading for November 2011 dashed hopes that RBI will advance a rate cut. Weakening of the rupee to an all-time low against US dollar also added to the woes. Profit booking by institutional investors led by a gloomy outlook for the economy portrayed by RBI in its monetary policy review pulled the markets further down.
Week Ahead
We expect the domestic markets to stay weak. Smart bargain buying by institutional investors will lead to short spell of rally.
However, your clients with a long term perspective should not be influenced by speculations surrounding the markets and should continue investing for the long term through SIP in equity funds.
