Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2018 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
Indian Stock Market News, Equity Market and Sensex Today in India | Equitymaster
  • MyStocks


Login Failure
(Please do not use this option on a public machine)
  Sign Up | Forgot Password?  

What lies ahead for debt markets?
Thu, 1 Jan Pre-Open

We all know that Indian equities have been among the best performing asset classes for 2014. The BSE-Sensex, the BSE Mid Cap index and BSE Small Cap index have offered 30%, 54% and 68% returns in the year till date. While the new Government and some steps towards reforms have been a major game changer for stock markets, a major share of these gains is due to high liquidity and expectations in the improvement in earnings. As far as earnings growth is concerned, the current stock markets seem to be factoring that in already, even as major reforms are yet to be implemented.

However, going forward, as oil rich nations face lower realizations and US is expected to increase interest rates, we will not be surprised to see the liquidity factor weakening. And the latter will impact not just the equity markets. A potential hike in US interest rates and outflow of foreign funds will make Indian rupee and bond markets highly vulnerable as well.

Another factor impacting bond markets will be the domestic interest rates. While RBI's tone seemed dovish in the last policy announcement, it might wait for the government's action to tame inflation before cutting rates. Further, the move will depend on global factors like Fed rates and oil prices.

In 2014, factors like falling oil prices and their positive impact on Government's fiscal health and foreign reserves, easing inflation, and growth expectations made the Indian debt market very lucrative for investors.

However, what happens to Indian debt markets in 2015 will depend not just on inflation, exchange rates and interest rates in the economy but also global economic and political factors. Many of these are hard to predict. Hence, we believe investors would do well not to speculate on the same and instead should focus on maintaining a well diversified portfolio across asset classes.

For information on how to pick stocks that have the potential to deliver big returns, download our special report now!

Read the latest Market Commentary

Equitymaster requests your view! Post a comment on "What lies ahead for debt markets?". Click here!


Small Investments
BIG Returns

Zero To Millions Guide 2018
Get our special report, Zero To Millions
(2018 Edition) Now!
We will never sell or rent your email id.
Please read our Terms