Several times the equities have been termed as an asset class of great potential. The Indian equity markets have learnt many lessons already and its time for the market to put all these understanding into practice.
Come
new year and whether it is an article in your favorite
business magazine or plain party talk, the discussion
invariably veers around to, what asset has yielded the
best return on investment in the year gone by and what
is indeed the asset class of choice, for investment,
going forward in the new year? If this question is
posed in the context of year 2002 and 2003, clearly
for the year that has passed, the verdict would be
nearly unanimous and in favor of fixed income
instruments. Although, returns from this asset class
in fiscal 2003 were not as spectacular as in fiscal
2002, nevertheless, it was far ahead of returns
yielded by alternative financial instruments.
The
heady returns given by fixed income instruments in the
last two years was largely a result of substantial
trading profits due to the fall in bond yields to
unprecedented low levels. This is unlikely to be the
case in year 2003 and as a result returns from fixed
income instruments are expected to be modest. In turn,
this means that the opportunity cost for an equity
investment is low. Equities as an asset class, we
believe, is rather undervalued and is well poised to
deliver superior returns in the current calendar year
on the back of the rapidly improving fundamentals. |
