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Investment Outlook – July 2016
India, in the global context, only looks better and is well recognized so. While the estimates for global growth are successively revised downwards, growth expectation of Indian economy is looking firm, especially aided by expectations of better monsoon this year.
Our long held view that equities are likely to outperform all other asset classes over next few years has held well so far. But with valuations moving up beyond reasonable levels, a defensive strategy would be a preferred option in short term.
We continue to believe that, if invested at valuations closer to long term average, equities is the asset class which still offers promise, notwithstanding the outperformance in last two years. The best part of valuation re-rating may already be behind and future periods are likely to be marked by improving corporate earnings growth, with major part of operating leverage yet to play out.
While the nominal rates have fallen, the real return in debt also has been running positive. It is preferable to lock-in yields as global deflationary risks continue to lurk.