Saturday, December 29, 2012

My six predictions for 2013

Before going into India specific predictions, let me share the big picture for  2013:
US will continue with its policy of quantitative easing – the US economy will do better than the current 2% GDP growth (expected to be around 3%) - there will also be mild austerity measures to balance the budget over long term (a small cut in expenditures and a mild increase in taxes for the rich) –the US economy and the US dollar will emerge stronger over the year.
Europe will continue in its difficult process of economic and political re-integration – the overall EU GDP is expected to grow between 0% and 0.5% –the  European central bank will continue with its policy of monetary easing – the German elections in 2013 will not result in change in direction – Greece, Spain  and Italy will continue to be in recession.
Asian economies and Latin American economies will increasingly become more prominent – China and India will do better in 2013 than in 2012. Middle East will continue its transformation and Sub Saharan Africa will grow further into prominence.

So here are my six predictions for India for 2013:

  • Inflation will fall slightly and RBI will reduce interest rates in the first half of 2013 – this will result in rise in rise in Sensex between Jan and June 2013.  FII inflows would be good (at least till Q3 2013). In the last quarter of 2013, the govt will go into election mode and it would result in volatile and directionless markets towards the end of 2013.
  • USD/INR ratio will go from current Rs 55 range to Rs 57 range by end 2103 – the devaluation will not be more than 5-6% through the year.
  • Gold will give close to 10% returns in 2013 – it will beat inflation but will not be a great investment option.
  • Long term Debt will give 11-12% returns
  • Overall corporate performance would be better in 2013 due to more market friendly policies. Hence, it would be prudent to look at select stocks – it would be possible to get 25% returns by investing in quality stocks at the right price. Industries that I expect to outperform are FMCG, consumer durables and financial services.
  • Improving economic conditions in India would result in real estate doing better in 2013 than in 2012 – so cities like Bangalore, Kolkata, Mumbai, Surat and Bhopal where real estate did not perform in 2012, will perform in 2013. Hyderabad real estate depends on the resolution of Telangana issue. I would urge caution for real estate investments in Chennai, NCR, Jaipur and Pune as the real estate market is over heated in these cities.

In all this, there is one joker in the pack – the Iran issue. This would become a flash point during this year and that can impact the global markets and it is difficult to predict the scenarios.
Beyond that, I am investing in 2013 based on these predictions.