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October 2011

The global turmoil continued to play havoc in the Indian markets too in the month of September. Equity markets ended the month of September on the negative side - BSE Sensex and S&P Nifty both closed down 1.33% and 1.15% respectively. There was a significant downfall in mid and small cap stocks too as the BSE Small Cap Index and BSE Midcap Index lost 3.5% and 2.30% respectively. BSE IT gained a whopping 4.22% during the month owing to the depreciating rupee. BSE Metal was one of the worst hit sectors in the month losing 9.11%. 

The month of September saw very high volatility due to a series of events in the global markets. One of the biggest reasons was the fall in rupee and weak economic data. On the other hand, there was huge sell off from FIIs too. 

Inflation has also been of concern though it is expected to cool off from here going forward, as the base effect kicks in. Slowing growth and poor economic data both point towards deceleration in the economy. Given this background it is likely that the equity markets would remain subdued for some time. We would like to stress that instead of trying to catch the market bottom, one should keep investing in equity in a disciplined manner, with the patience to stay invested for a longer time period. Hence, we would again like to reiterate the importance of investing systematically in equity markets over a period of time so as to smoothen the impact of volatility. SIPs are, thus, one of the best investment vehicles to access the equity markets, especially in these turbulent times. Also having a long term horizon would help you create wealth and ignore short term volatility and downfalls in the markets.

We expect the macro picture to improve once this short phase of turbulence passes and strongly believe that the equity markets are offering some really good opportunities for long term investors. On the debt side you may consider investing in SBI Dynamic Bond Fund, especially in times of global uncertainties, high inflation and tight monetary conditions. This is a good time to invest in fixed income plans and benefit from the high interest rate regime in a tax efficient manner.

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