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Quality is the key

May 21, 2003

In May so far, the BSE Sensex has gained 3.4% and the Nifty is up over 4%. In essence, the month has been reasonably good for investors and one has seen widespread buying across all sectors, off and on. Is the momentum for real or are we in for another round of sluggishness?What has been encouraging in this strength is that the buying is not really focused on any one particular sector, barring of course the PSU banks. We have seen spirited strength in pharma, cement, PSUs, utilities, engineering, FMCG and a host of other sectors, and investors have bought into pivotals that have been languishing at low valuations for quite some time.

One can see a visible pattern wherein money has been poured into heavyweights. But mid-cap stocks have also caught the markets fancy. Some of the top gainers in the last month have been mid-cap. What this indicates is that market movers have begun to look ahead with hopes of higher growth buoyed by encouraging economic indicators. They probably seem to be looking ahead to benefits that would accrue from infrastructure development going forward, as well as the fact that at present, India is one of the key growth economies globally.

As retail investors, it is time that we also evaluate the prospects of India Inc. five years even a decade down the line. Our growth has been stable so far, our economic policies have been largely in the right direction, but the pace of reforms is cause for worry. But net, net, India has a lot to offer and global investors may be beginning to see that. In this scenario, we continue to be positive to Indian equities and advocate sticking to quality stocks.

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