!!SAI PARSADAM!!

BIG BOSS

VIKAS PARSHURAM SAMWATSARE

**************************************************

15 ideas for 2013 FOR STOCK MARKET

It is that time of the year when everybody, who is anybody in the capital market, starts making
annual prediction as to what lies ahead for us in the year 2013.
And, unlike 2012, this year, it has become fashionable (acceptable?) to come out with a very
optimistic view.
But, the fact is that predicting the markets (for 2013) is challenging, to say the least. However, one
thing seems distinctly possible for our markets - we should start on a strong footing and hopefully
make an attempt to scale the November 2010 high (NIFTY- 6312, Sensex- 21005) in the first quarter
itself.
FISCAL CLIFF, RBI & UNION BUDGET
With the fiscal cliff deal in place, we feel that global factors will take a back-seat for sometime
now as India starts looking forward to the loosening of the monetary policy (RBI) later this month
and the Union Budget (from arguably the stock market’s most popular FM) in February.
And, while many may argue that populist measures will dictate the last Budget of the UPA
government (before the nation goes to polls in 2014), we beg to differ. While, like every year, the
Budget will have its huge dollops of populist measures, we do feel that the finance minister will
perform a good balancing act and announce measures to kickstart the economy, while continuing to
work on reining in the fiscal deficit.
And, our view is that if the present government harbours any hope of returning to power in 2014, it
will have to be very lucky as far as the state of the economy is concerned. If by election time, the
Indian economy is clearly back on the recovery path, it will be the single-largest trump card for the
government. Therefore, in all probability, we don’t expect the economy (and the stock markets) to
be ignored by the finance minister.
THE LIQUIDITY FACTOR:
While India saw huge inflows from FIIs in 2012, which contributed largely to the stock indices
yielding a 26 per cent return, one needs to accept that India attracted huge flows mainly at the cost
of China. Therefore, if China shows any semblance of recovery in the current year, it could divert
some inflows away from us.
INTEREST RATES WILL DOME DOWN, FINALLY:
Some of the pre-conditions for a rate-cut – lower rate of price increases and a decline in fiscal
deficit – are emerging. However, the magnitude of decline in interest rates will depend on crude oil
and other commodity prices remaining stable, or falling. Also, it needs to be taken into account
that lower funding (interest) costs could translate into higher imports, weakening the currency. This remains a worry.

3 | P a g e
PCG Research
PCG
2013 – THE CHALLENGES AHEAD
THE RUPEE:
India’s current account deficit widened to a record high of 5.4 per cent of GDP in the September
quarter as export growth slowed more sharply than imports, and with a similar gap expected in the
December quarter, the weakness in the rupee is likely to be prolonged. A sharp rise in gold imports,
a hefty oil bill and falling exports due to the global slowdown have kept India’s current account
deficit at persistently high levels.
The rupee was the third worst performer in Asia in 2012, even though net inflows into Indian stocks
were the highest in the region.
EUROPE CRISIS – FAR FROM OVER
Even as financial markets are calmer and the chances of the euro disintegrating have diminished, it
has come at the cost of highly indebted eurozone states committing themselves to spending and tax
increases. This could ultimately lead to the 17-nation eurozone contracting further in 2013 as
deficit-cutting measures bite deeper. Rising unemployment and falling tax receipts would make it
harder for governments in countries such as Italy, Spain, Greece and even France to meet their
budgeted targets.
That could unsettle financial markets again, particularly in countries where political instability is
adding to the uncertainty.
CONCLUSION:
We do believe that the Indian markets will start on a firm footing and possibly make a new high in
2013. However, global equity markets are unlikely to do well as macro factors look terrible and one
could see a sharp growth slowdown as we move into the year. And, while India will show great
outperformance in 2013, it can’t remain immune to a bad global situation and therefore, will suffer
some hiccups going ahead.