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September 2012

Reversing the decline of last month, Indian equity indices S&P CNX Nifty and SENSEX recorded a gain of 0.34 % & 1 % respectively in the month of August 2012, despite a downward trend in most global indices.  

On domestic side GDP numbers showed slight improvement in the Indian economy. India’s GDP grew by 5.5% in Q1 FY13 compared with 5.3% in Q4 FY12. Forecasts, however, continued to remain uninspiring for the economy. India's headline inflation rate based on the Wholesale Price Index (WPI) fell to a 32-month low of 6.87% in July following 7.25% a month ago. The Reserve Bank of India (RBI) in its annual report expected India’s FY13 GDP to be around 6.5% amid weak global and domestic factors.  

To support the economy and boost investor confidence, Finance Minister P Chidambaram promised a slew of measures, including a roadmap for fiscal consolidation, clarity and stability in tax laws and working with the RBI to tame inflation in the medium-term. The proposed postponing of the General Anti-Avoidance Rule (GAAR) by a year for wider consultations comes as breather for foreign investors. 

Retail investors with long term investment horizon would do well to continue to invest in equity funds with good track record and those with short term horizon can continue to park their short term surplus funds in income / ultra short term schemes and optimize their portfolio to benefit from the prevailing high interest rate scenario. These schemes are typically suited for parking unutilized lazy money, and the investments can be for as low as three days, without any exit load, or for as long as one wants. Retail investors should also look at FMPs of different maturities as they are most tax efficient. SBI Mutual Fund has launched several FMPs and will continue to do so to fulfill investors’ requirements. 

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