Investmentz ideas..

There are two distinctly different ways of looking ahead at F>Y>11-12 . One can try and figure out the changes and try to predict them.

The second way is to figure out things that would remain unchanged. I think, for those in business, the first way is the better one. However, for an investor, either of the two approaches might work.

Predicting new trends is riskier and the chances of successes lower. But the potential rewards are greater. The second way is the safer one and one where a much larger proportion of people are likely to find success.

However, I’ll go with the first option and try to figure out new trends that could emerge in F.Y.11-12

1 I expect fixed income returns to become more robust. The last few years have been characterized by investing in fixed income assets, which has barely been able to match inflation.

This has been a slow-motion disaster for a conservative Indian saver who won’t touch anything that isn’t predictable and preferably guaranteed. For these people, the last few years have seen a steady, at times unnoticed, erosion in wealth as returns have lagged far behind the effective inflation rate.

This trend will now end. Notwithstanding all the talks of excess liquidity chasing inflating assets, we could be headed for situation where the demand for investments will pressurize the savings available and there’s likely to be a longish period when fixed income savings will generate better real returns than their past performance.

2 Investing in infrastructure will again start making sense and this trend will continue for a long time. Infrastructure-related investments have had a setback from 2008 onwards, but this phase is now at an end. What we saw earlier was way too much excitement, hype and money chasing too few real investment avenues.

However, the simple logic of this sector’s fundamentals is bound to assert itself strongly in the long run. India needs huge investment in infrastructure and these investments will get good returns for a long time. Whether its power or transport networks, a lot of it has to be built. However, there’s one caveat: this sector will remain prone to hype and vulnerable to the way governments make policy and pick winners and losers.

3 China’s stock market will start reflecting that country’s enormous potential in a better way. Relative to the country’s economy, the Chinese stock market has been a barely-relevant sideshow. This is bound to change and it will have two implications for the Indian investors.

First, more people will invest in China and China-related stocks. This is already possible through a handful of stocks as well as Hang Sang futures on NSE, but the possibilities can only grow. Second, the relative share of attention that Indian stock markets will get from Western investors will decline. Neither of these will happen overnight. But they are inevitable.