Forecast for 2017: Subramoney

Equity Market Outlook

Major themes – to impact India in 2017 include increase in consumption demand, growth led by reforms, monetary stance of global central banks and economic policy decisions, etc.
Equity Investing – Improving fiscal situation, inflation rate, exports growth, rising FDI flows point towards fundamental, amazingly well sold SIP story, banks awesome ability to sell ULIP, life insurance companies have a huge advantage of not having to show portfolio for 20 years, stability in the economy which augurs well for long term equity investing, Increase in bank branches will dramatically increase ulip sales.
Corporate earnings – volatility may increase as corporate try to tide over the impact of currency issues. Fundamental strength of economy & attractive valuation of markets present a positive outlook for equity.
Demonetization – will have a positive impact on the economy.
More IFAs, RIA, RMs will be recruited so sales of top mutual funds will be fantastic even if they have poor performance
Most mutual funds will have a huge PR budget so the real news will not reach you. Awesome.

Fixed Income Outlook

Rate cuts – Slowdown in growth (no clue why, it is not because of demonetization – we were asked to add that) and expected soft inflation will leave room for rate cuts. MOF has said rate cuts will happen. Rbi will comply.
Credit Environment – Anticipated fall in lending rates post the currency swap exercise (increase in bank deposits) would help to bring down cost of capital for companies. I could not say this last year as there was no demonetization, hence had to write this up. We have been told that this will be good for the improvement of the credit environment and benefit accrual strategies. Actually I hope it does, because I have invested a lot of my money in accrual strategies, but that is your call.
Inflation – RBI has been well guided on how to give these numbers like any responsible, alert and good Governor should. It it is close to the real numbers, we will make dhoklas for the new RBI man. It of course could undershoot RBI’s target of 5% in March’17 owing to good monsoon, and other good effects of demonetization thought of by our visionary PM.
Bond Prices – The infusion of fresh deposits in banking system (which we believe will never be withdrawn -post demonetization) is likely to shore up demand for G-Secs by banks (remember it takes a PSU bank to borrow at 7% and invest at 8%), which could be very good for better bond prices.

For those who thought this was humorous, well it is not so. I have never been able to write good humor.

Subramoney