Domestically we believe 2012 will be a year of consolidation and slow growth with low visibility on pickup of the investment climate and demand pull waning due to a non supportive fiscal. A lot needs to be seen how political order is restored and the budget session would be a pointer to the government’s stance on fiscal deficit and growth.
Our themes for 2012 would be currency depreciation (continuation of risk off trade), growth slowdown (political and policy), NPA scare in the banking system, likely falling commodity prices, and a declining inflation and interest rate scenario. In this capital starved economy where availability and cost of capital are issue for sustaining normal operations, investment pickup is unlikely and asset / capital light businesses should do well. That would entail IT, pharmaceutical, consumer business and the services part of the economy to do well. We believe it is too early to play financial leverage or operating leverage as a large part of India Inc will struggle with a weak demand.
My view: I have observed that its not easy to forecast for the whole year. Be it any smart investor! I think its better to divide 2012 into first half and second half. I believe 2Ps (political and policy) would both be favourable for India Inc in the second half while first quarter of first half should be a consolidation period. Remain long on consumption.
We hope the year 2012 is a great one for India and all of us. Wish you all a very happy and prosperous New Year!!