Indian stock markets will give better returns over a period of three years compared to other instruments like fixed deposits, debt-oriented funds and gold, felt bankers and consultants. However, they added that the global economy would enter a slow growth phase because of the US downgrade, which would also affect the Indian economy to some extent.
"This is the time to invest in the equity market through diversified mutual funds," according to Dhirendra Kumar of Value Research. However, the market may move either way for some time and it is advisable to invest in regular intervals and not in one go, he added.
"If one invests his entire savings at the current level and market falls further, he may have to exit at lower level after experiencing loss," Kumar said. But if he invests over a period of time in intervals, he will be able to enter at the lower levels and benefit in the long term.
Indian economy is facing a risky scenario of reduced liquidity in the international markets due to possibility of defaults by some developed countries in the next two to three years, said Enam Securities in its "India Strategy"' report. But, this will also bring down the commodity prices which would help India contain inflation.
Enam added that in the next two quarters corporate profit may bottom out as interest rates peak. This may add to volatility in the stock market. But a huge latent demand for both goods and services will continue to fuel the growth in Indian economy. A sustained growth in GDP of around 8% will lead to a nominal growth of around 14%. This will enable the EPS (earnings per share) to grow at around 18% to 20%.
The slowdown in the global economy should make India an attractive investment destination, said market players. But the high inflation rate of around 9% has made the present high interest rates offered by banks and other companies unattractive.
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'I made my money by selling too soon.'
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