Making a presentation on mutual fund investments at a workshop organised by DP Poddar & Co, a CSE member, Mehrotra said the Indian markets were still cheap if one took into account the low valuations of several pivotals. "If HLL, ITC and Infosys were shaved off the Sensex, the index would be at the level of 3500 and not the 4700 that it touched recently," he said. He said in future the critical criteria for investments would be the "knowledge base" rather than "asset base" of a company. He said that the services sector, which now accounts for one-third of the country's GDP, would progressively contribute the lion's share of GDP as it does in the US.

As fornegatives which could drag the market down in the near term, Mehrotra maintained that the high fiscal deficit of over 6 per cent was a major concern as the government was "pre-empting too much money to cover the deficit" which could otherwise have gone for funding development.

He pointed out that a large increase in foreign direct investment next year was on the cards, provided the government sorted out vexatious issues related to telecom, insurance and power sectors.