Stocks to witness high volatility in 2008

By siliconindia   |   Thursday, 20 December 2007, 17:28 IST
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New Delhi: Investors should be cautious before investing, says Fidelity International India. Investors should focus on firms with strong earnings and quality as Indian stock market is expected to witness increased unpredictability in 2008 added the company management. "We go into 2008 with economic data still robust, the government plan of infrastructure spending of about 400 billion dollar on track, but on the backdrop of developments in international markets and high valuations, we expect the Indian market to see high volatility," said, Sandeep Kothari, Manager, Fidelity International India fund. "In our view, the corporate earnings outlook continues to be reasonable," added Kothari The view is in contrast to the market expectations that earnings growth for financial year 2009 may slowdown to about 16 percent as compared to 18 percent for financial year 2008. Supported by growth outlook of firms' earnings and a positive macro environment, Fidelity said that stock 'valuation are not in bubble territory,' although they are at the higher end of the trading range. A rate cut could be on cards next year if inflation remains within the limit prescribed by Reserve Bank of India (RBI) despite rising oil prices, said Fidelity. The buoyant mood in the Asian market would continue in 2008, driven by continuing economic growth, but global Markets would face some hurdles because of the tightening of credit conditions. Asia's importance in the global economic scenario is expected to rise significantly, Fidelity said. Besides, share price in Asia have risen sharply in some markets such as China and the continued growth there would be reflected more in equity markets. "Next year could be one of the most interesting for equity markets this decade. Investors would be able to make gains provided they are careful about their stock selection and are willing not to be led by the main stock indices, said Michael Gorden, Head of Investment Strategy, Fidelity International.