Wednesday, January 4, 2012

What is in store, 2012?

The year gone by was wild, crazy and full of surprises. Here's my prediction (read wish list) for 2012.

  • Badly bruised Indian equity market looks poised to heel this year.   We are off to a good start,  but I am not suggesting that it would be a one way street; far from it.  However with RBI now ready to focus on growth, easy money policy will help corporate India and the sentiment will change for better.  Also investors are sitting on cash and some already bottom picking. 
  • Expect rupee to end the year stronger. While the volatility is likely to continue and more downside in store, the improvement in overall sentiment (if ) should prop rupee.  Several measures (proposed and approved) including the latest to allow foreign individual and pension funds to invest directly in equity markets, encouraging trend of FDI, growth focus of RBI and hopefully a better year for policy decision(s) than the one gone by - should help our local currency gain part of its losses
  • EU will stay in tact and slowly limp out of crisis, with as much drama as we have seen recently though.  Euro weakness looks inevitable but magnitude may not be alarming (or may be disappointing, depending on which side of the table one is)
  • US would continue its modest growth  and Dollar would retain it's safe haven status for most of part of 2012.  Europe's travails will keep investors glued to USD; however Fed's continued easy monetary policy would underplay dollar strength
  • US dollar being replaced by China? - not this year, not even this decade.  Japan and China (second and third largest economies) have entered into a pact to promote to trade / exchange their currencies without using dollar as the intervention currency.  Good starting point, but a long way to go!
  • Gold will continue to do well; stay invested

Stay focused and nimble. Wishing you all a successful 2012!

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