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January 2013

The year gone by brought lots of cheer to equity markets. Though the markets have shown nominal incremental rise in the month of December 2012, the Indian indices S&P NIFTY INDEX and SENSEX have recorded a growth of 27.70 & 25.70% respectively in the year 2012. Considering the hope for further reforms and policy action by the Government, markets could do well in the times to come. 

The markets began the month on a positive note as the moderation in India’s Gross Domestic Product (GDP) to 5.3% in July-September 2012 from 5.5% in the previous quarter fuelled rate cut hopes by the Reserve Bank of India (RBI) at its mid-quarter monetary policy review later in the month. While the central bank did not cut interest rates at its policy review, it hinted at monetary easing in January which aided market gains. Other positives such as passage of key bills - foreign direct investment (FDI) in retail sector, Banking Laws (Amendment Bill), 2011 and Companies Bill, 2011 - in the parliament during the month, which will aid the banking and investment environment in the country, also helped curb losses in the market. The market was also supported by continued and strong foreign institutional investor (FII) buying. FIIs were net buyers of secondary market equities worth Rs 24,299 cr in December 2012 compared to net buying of Rs 10,967 cr in November 2012. FII inflows continued even during the yearend holiday period.

Gains for the markets were, however, capped on strong domestic industrial production data which dampened investor sentiment about a rate cut by the RBI despite fall in monthly inflation data. India's industrial growth touched a 16-month high of 8.2% in October (against a contraction of 0.7% in September) while headline Wholesale Price Index (WPI) inflation fell to a 10-month low of 7.24% in November (compared with 7.45% in October) due to easing in annual fuel and manufacturing inflation rates. Tussle in the US throughout the month over passage of a bill to evade the fiscal cliff also kept investor sentiments on tenterhooks.

For Mutual Fund Industry, the year and markets have been good. The industry has shown signs of growth with around 15.38% increment in the industry Average AuM in 2012. Many of our Equity and Fixed income funds have outperformed respective benchmarks consistently. New Year has brought in one more investment option for saving tax – Rajiv Gandhi Equity Savings Scheme (RGESS). The RGESS was announced by the Central Government in the Finance Budget 2012-13 to encourage the savings of the small investors in domestic capital market. The deduction available for RGESS is covered under Section 80 CCG and the same is over and above the deduction of Rs. 100000/- (One Lac) available under section 80C. 

We are in a New Year and we make resolutions to bring discipline to our lives. It’s apparent that one should start investing at the earliest to bring discipline to his or her financial life too.  Systematic Investment Plan (SIP) can be one of the best ways to invest throughout the year. That helps you to create wealth, by investing small sums of money every month, over a period of time reducing the burden of investing in lump sum. Moreover, there is no need to time the market. Also, disciplined investments in steady increments over a long period of time help even out the ups and downs in the market. In addition to investing in equity and debt asset classes, one can also look to invest in gold through SIP route in SBI Gold Fund. Analyzing your risk appetite & investing in a well diversified portfolio can be the key for wealth creation.

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