Volatile and Prosperous fiscal 2007 had passed on the baton to the New Fiscal 2007-08 and it is time to crystal gaze and plan for our investments in new fiscal 2008 for better returns. The outgoing fiscal 2007 is leaving behind many milestones in the Indian Capital Markets and gave a rare hattrick of four prosperous fiscals in succession. Then, Will the fiscal too bring in further wealth creation or any unpleasant wealth erosion and pains, as was seen in the first week for the investors?

Before looking ahead, let us peep through the rear-view mirror for a moment. Earlier, after the prosperous fiscal 2002-2003, fiscal 2003-2004 was a dream year during which the BSE SENSEX had grown from 3049 of 31.3.2003 to 5590 on 31.3.2004.Later, in the fiscal 2005, the SENSEX rose from 5590 to 6493. During fiscal 2006,the SENSEX recorded a growth rate of 74%to 11307 from 6493.In the outgoing fiscal 2007,the SENSEX rose to a high of 14724 on 9-2-2007 and closed the fiscal at 13072.Now, what next after these four successive prosperous years? If we look at the apparent & unfolding positive and negative factors, probably the party is still on and the investors can welcome the new Fiscal with re-assuring hope. Is it a mere New Year wish or a reasoned perception? Let us look in detail.

Looking at concerns-In the Indian context, bull markets have always been shorter than the bear markets, which lasted longer. Hence, after four prosperous years in succession, probabilities for a bearish markets ahead are more. India's fiscal deficit is another thing of concern. Prevailing higher crude oil prices do not auger well for the economy. Appreciation of British Pound and Euro against the Indian Rupee in the last fiscal sends some warning bells. Even the probable inflationary pressures in the new year cannot be ignored. Indian valuations appear a bit expensive in comparison with those available in the other developing nations. Political movements like the Nandigram Singur agitations does not give good signals to the global investors. RBIs determination to contain inflationary trends is leading to interest rate hikes which may result in lower growth rates of corporate profits and lower GDP growth rates even.

Now, look at the positive factors-India is the second fastest-growing economy of the world (second only to China). GDP growth rate of 8.50% to 9% can be expected in the next few years even. Tightening of monetary policies is not limited only to our economy. Deposit reserve ratio was raised six times in China in the last 12 months to the current 10.50%. In such a background, RBIs monetary policies need not be a matter of serious concern for us.

Exports growth rates of the economy are really pleasing. Blooming global outsourcing only highlights the India's improving potential. Consistent and impressive growth rates of the Indian Corporate sector aroused confidence. Indian Rupee's appreciation against US Dollar in the outgoing fiscal is very impressive, which augurs well for the increased FIIS inflows. Indian Rupee has appreciated against Japanese Yen also in the last one year. Let us remember that more than a decade long boom-conditions prevailed in the U.S.A in the nineties during which its currency US Dollar ruled stronger than others.

The burgeoning foreign exchange reserves of $ 199.20 bn, as well as the government's commitment to reforms and its eagerness to attract investment inflows are big positive factors. Probable revaluation of the Chinese currency by about 10% in the new fiscal only auger well for the Rupee's strength. Even on crude oil prices-last year proved that the impact of high crude oil prices is no longer alarming in the light of globalization. Moreover, crude prices are likely to soften further after a couple of months. Coming to the fiscal deficits, India's position is far superior to that of U.S.A.

During 2006,more than $ 7.09 billions moved out of US Equity markets towards the emerging markets in spite of federal interest hikes to a record 5.25%p.a.Now,US interest rates have peaked and even FED rate-cuts can be expected from the middle of 2007. Problems in the financial sector of U.S.A and the likely US Slow-down signals further flight of capital from Dollar assets to Non-Dollar assets across the globe. Even the Euro zone interest rates do not have far to go. Though the Japanese economy can be on the upswing, interest hike of beyond 0.50%p.a is not expected from the Japanese central bank. All these are favorable for increased inflows into India in the new year. So, the historical perspective of the market is no longer valid. What we have seen in the past 55 years in India may not be relevant for the next few years. In fact longer bull phase (of around a decade) that was witnessed in the U.S.A in the nineties and in China in the recent past, can be visualized for the Indian Context in the evolving conditions. So, the concerns of bearishness after four consecutive prosperous years need not bother us much.

Though inflation is considered as a major concern for India, almost all the countries face this threat and we need not be unduly worried over this. Even on the valuations front, in comparison with other countries, mere PE Ratios alone do not impact the investor's fancy. Better growth rates perceived for the Indian Corporate Sector and the depth of the Indian Capital Market may compel the global investors to continue buying the Indian Growth Story for some more time. Look at the recent news-Dubai based Evolence India Holdings recently raised USD 65 mn. India-Focussed funds. Australia based Macquarie Bank is setting up $ 1 billion India dedicated infrastructure fund. Indian story is attracting global investors in droves. Apprehensions of FIIS pull out from China sent shock waves through out the globe. Though the Chinese market recouped the losses, global investments pull out from China cannot be ignored, especially in view of the massive inflows into China for more than a decade. In fact such an event can be beneficial to the Indian Economy, even if it can attract a fraction of such outflows. Looking at the sustainable impressive growth of around 9%, Indian economy will be certainly attractive for the global funds.

By this, I do not mean that the road ahead will be smooth and safe. Volatility is to be accepted as a matter of fact, when the markets race past to unchartered territories. May-June 2006 movements of the market should serve as a reminder for the investors. BSE SENSEX plunged to a low of 8799 on 14-6-2006 from its high of 12671 it scaled on 12.5.2006(in just about one month). The recovery thereafter was equally stronger with the market even crossing the 14700 level in February 2007. Such volatility is to be carefully utilized to reduce the cost of one's holdings by selling at higher levels and buying back at lower levels. IN fact, we can look at the SENSEX level of around 16000,if not beyond, in the New Year Fiscal 2008. Fiscal 2008 can be more eventful than the previous Fiscal 2007. Cautious and conservative investors can get around 20% returns in the new year. Brave, nimble-footed studious and aggressive investors can even target dream returns commensurate with the risks they are willing to take.

In the past few fiscals large cap momentum stocks stole the limelight. How ever, things are more likely to change than not, in view of the provision for SHORT SELLING permitted along with stock-lending in the new fiscal. This move is reportedly is expected to bring more depth to the markets. However, this will certainly tilt the balance in favour of BEAR OPERATORS, especially after 4 prosperous years. In such circumstances, most of the bull operators are likely to turn their operations on to the growth stocks from the mid/small cap segments. Hence potential mid/small cap stocks are likely to give superior returns in the NEW FISCAL even though the indices may not be able to record impressive growth rates.

Looking ahead, which sectors appear promising in the new fiscal?

Infrastructure, Cement, Steel, Banking, Pharma, Textile, IT & ITES Sectors are likely to be facncied in the new financial year.

Infrastructure Sector

As is evident, this sector is getting the lion's share of the governments attention and encouragement. Infrastrure and property development companies are likey to emerge winners in the New Fiscal also though they got beaten in the last two months. GMR Infrastructure, MSK Projects, PBA Infrastucture, Lanco Infra, IVRCL, NCCL etc are likely to be in the attention.

IT & ITES Sector

This sector too is likely to continue its winning spree in the new fiscal also. TCS LTD,I GATE GLOBAL,TECH MAHINDRA, SATYAM are likely to be in the focus. Animation sector of this industry is likely to be more visible in the new year. Tata ELXI, UTV Software, Silverline, Color Chips etc are likely to emerge winners.

Pharma Sector

New financial year is bound to throw new winners from the Indian Pharma sector in view of the competitive strength of the country as well as the new winners in the wait. Jupiter Biosciences, Zenotech Lab, Dishman Pharma, Glenmark, Divis Lab Ltd, Ind-Swift Ltd, Natco Pharma, Nicolas Piramil can be watched for wealth creation. Of these, JUPITER BIOSCIENCES LTD appears grossly underdiscounted at its current price of around Rs 147.00.Though some research houses gave sell call on this scrip, it can give surprising returns in the new fiscal.

Textile Sector

Though the sector could not live up to the expectations in the last two years, the sector is bound to record higher growth rates in the new year. Arvind Mills, Eurotex Ind & Exports Ltd, Visaka Ind, Nahar Exporst etc. are worth watching. Eurotex Ind which is available at around 40 percent of its book value can spurt to its potential.

Cement Sector

Tough this sector is battered badly in the recent past; it is going to be the joint beneficiary of the INFRA-BOOM in the new year. ACC, GUJ Ambuja Cement, Gracim, Sagar Cement etc. can be watched.

Steel Sector

Tata Steel, National Steel can be watched-Ruchi group may go for consolidation of its steel businesses under this company.

Banking Sector

This sector got battered in the first week of the new fiscal in response to the RBIs measures. However, the sector is likely to get back the investors attention in view of the likely consolidation moves in the industry. Canara Bank, Bank Of India, Vijaya Bank, IDBI etc can be considered for good returns. Things are really happening in Canara Bank, which had strengthened its position in the industry in the last year with all-round improvement in various parameters. It is likely to continue its winning streak in the new year too. Though the research team at HSBC had given a 12 months target price of Rs 310 to Canara Bank, it is expected to cross this target much earlier.

Primary Market

The primary market is likely to see increased activity in the new fiscal. Investors can look forward to good public issues like Shanta Biotech and Power Finance Corporation and good follow-on issues like CANARA BANK, However as the primary market improves, even poor quality papers will be dumped at high premiums on unsuspecting investors. Care must be exercised that past mistakes are not repeated by subscribing to poor quality paper at exorbitant prices.

Choosing the right investments alone is not sufficient for ensuring good returns. Profit booking will be more relevant in the new year, especially after four prosperous years. Booking profits at higher levels to increase liquidity and buying again at lower levels will ensure superior returns.

In these fast-changing times, investors who update their knowledge with the help of good and unbiased experts can benefit from the emerging conditions. Buying into potential winners, booking profits at higher levels during market peaks to re-enter at lower levels should be the approach in the new year. Though the outlook for the Indian economy in the next few years appear rosy, investors should preserve their pot of profits in the new fiscal (by booking profits at market peaks), especially in the light of MAY-JUNE2006 carnage. One interesting fact is-Investments made during the 1st quarters of the last four fiscals gave superior returns for the investors.