Surf the Sensex, ride the rates
As the Sensex reaches new highs and the Reserve Bank of India tweaks up interest rates in its battle against inflation, small investors have their own worries in responding to market movements and policy changes. Shares, deposits or Provident Fund? | Keep investing regularly, but with cautionbusiness Updated: Sep 18, 2010 00:22 IST
Should you be celebrating? Or should you worry?
As the Sensex reaches new highs and the Reserve Bank of India tweaks up interest rates in its battle against inflation, small investors have their own worries in responding to market movements and policy changes.
Experts say: watch your steps but don’t stop. And keep the long term in mind. “Investors should invest regularly and not start or stop investing with a fall and rise in markets,” said Sundeep Sikka, CEO, Reliance Mutual Fund.
In only 12 trading sessions, the BSE Sensex has risen 9 per cent. That is disconcerting, but not if you are a long-term investor and not a short-term trader. However, if you have direct exposure to equities, experts advise you to book some profits at current levels and wait for a market correction to re-enter.
Experts see the fundamentals of the economy to be sound — GDP growth expected to be in excess of 8.5 per cent, a good monsoon and fiscal deficit on track. Only bad global news may be a dampener.
“On a 3 to 5 year term I am very confident that earnings will grow at around 25 per cent,” said Rukhshad Shroff, India country specialist, JP Morgan AMC, Hong Kong.
Last week, Employees Provident Fund (EPF) interest rates were raised by 1 percentage point to 9.5 per cent for the financial year 2010-11. EPF is now more attractive for retirement planning as the returns accumulate over a long period.
Salaried individuals with a basic salary of less than R6,000 who were not contributing to EPF may now look at this. “Those who did not invest thinking that they may invest in better opportunities may now move back to the EPF as it will work well in the long run,” said Ranjeet Mudholkar, CEO, FPSB.
But do not go overboard.
“The 9.5 per cent interest is only for the current year and it may not continue after that. So keep a balanced approach between equities and provident fund for retirement planning,” said Surya Bhatia, a financial planner.