Indian fund managers believe volatility will continue to remain in Indian markets for a few months with chances of further sell-off by foreign investors, if Europe crisis deepens.
However, the fund managers survey conducted by FE, also finds that Indian equity indices are currently trading at attractive valuations with chances for investors to earn better returns over the next 12 to 18 months.
Anoop Bhaskar, head-equity at UTI MF says, ?We believe that short term volatility will remain, but current valuations are good, they are neither cheap nor attractive.?
He also added global economic scenario is not rosy as it was earlier. ?If we see some negative news from the Europe then definitely it will have adverse impact on sentiments and there might be some outflows from domestic markets,? added Bhaskar.
The view of most of the fund managers is that currently Indian markets are trading at 13-14 times one year forward earnings, which is quite attractive compared to its historic averages.
Sandesh Kirkire, CEO at Kotak Mahindra MF says, ?We believe that currently markets are well priced and not much expensive. Once the second quarter of the current financial year get over, we might be able to ascertain the earnings expectation for FY 13?.
Fund managers expect that Indian markets might witness an uptrend if crude prices correct as it might reduce fiscal burden as well as inflationary pressures. On interest rates, most felt the interest rates have neared its peak.
However, Europe crisis remained a cause of worry for the Indian fund managers. ?We expect periodic shocks (from europe) to continue. The only potential sustainable solution seems to be the issue of a Euro Bond backed by all countries of the European Monetary Union to fund the problem of crisis countries,? said a fund manager from a leading fund house.
The silver lining remains the positive monsoon data, which could help cool off food inflation from the current levels.
S Naren, CIO-Equities at ICICI Prudential MF says, ?A good monsoon has resulted in the coming off of food inflation, which is a positive factor. We believe we are at the peak of the tightening curve of RBI.?
However, he added, that it is to early to comment on whether rates are expected to come down in the near term.
Fund managers are aggressively looking at banking stocks particularly those beaten down in the current market carnage. ?During the start of the current calender year, we were staying away from banking stocks. But again in August-September we have started investing in banking stocks,? added Bhaskar.
On investments, fund managers felt retail investors should continue with their investments into equity markets to average out the cost. They hoped that government needs to bring out some strong measures in infrastructure sectors as it will improve overall investor sentiments.