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June 2012

The starting month of this financial year was a rollercoaster ride. The Indian equity markets represented by S&P CNX Nifty & SENSEX posted negative 0.9% & negative 0.49% returns in the month of April respectively, in-line with the performance of most global indices.

As US economic growth was lower than expected, the expectation of further stimulus from the Federal Reserve boosted the sentiments of investors worldwide. Indian markets also responded positively due to weakening of rupee. The news of the Indian Metrological Department's projection of normal rains in the monsoon period was another factor that aided the market’s up move. 

In spite of these positive signs, April was a disappointing month in terms of inflows. The domestic investors also seemed nervous because of various factors like lack of major policy initiation in the country, inflation and controversial General Anti-Avoidance Rules Issue (GAAR issue). FIIs were net sellers during the month with a net outflow of Rs 1.6 bn due to concerns over the GAAR provisions. The FII inflows are expected to remain lackluster as lack of clarity on GAAR weigh on FII’s minds.

Widening trade deficit and FII outflows resulted in depreciation of the rupee against the US$. Rupee depreciated by another 3.7% to Rs 52.7 in April after depreciating by almost the same level in the previous month. And S&P downgraded outlook on India to negative.

India's retail inflation shot up to 9.5% in March from 8.8% in the previous month due to higher food and fuel prices. In a bid to boost economic growth, the RBI in its annual monetary policy for 2012-13 slashed the repo rate by 50 bps to 8%. Similarly, the reverse repo rate is now at 7% from the previous 7.5%. The next two events to look forward to on the domestic side are the monsoons and the government policy actions.

To curb the soaring inflation one may think of investments through Systematic Investment Planning (SIP). SIP is a smart way of planning your investments that will help you build your wealth step by step over a period of time. With SIP one can benefit with two powerful strategies: i.e. the power of compounding & rupee cost averaging. To start with SIP you may look for SBI Magnum Equity Fund from Equity Asset class. From Fixed Income Asset Class, SBI Dynamic Bond Fund can be looked forward for investments in fluctuating interest scenarios as it offers flexibility to your investments.

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