India growth story to continue in 2010

India's economy is expected to grow by at least 7.5% in the next financial year (to March 2011), whilst it is widely expected that interest rates will go up modestly in 2010 with GDP growth showing a robust recovery.

Sam Mahtani, Emerging Equities fund manager at F&C expects that the Indian markets will make further progress during  2010, however in the short term he believes that markets may consolidate and we could see a 5-10% correction with the current concerns on growth in China. He has aligned his Indian Investment Company portfolio with what he believes are the four most important investment themes/sectors in 2010 - pharmaceuticals, banking, metals and Information technology. 

"I have been positive on Infrastructure since May 2004 but at the end of last year reduced emphasis on this theme and shifted the key theme in the portfolio to Information Technology (IT), as the infrastructure story is already reflected in the stock market valuations of the big infrastructure providers like BHEL. In IT we recently increased our position in Wipro, one of a number of positions in the technology sector set to benefit from a recover in spending during 2010.  In addition, we continue to be overweight Business and IT consulting specialists Infosys and Tata Consultancy Services as we believe they are also going to benefit from increased technology spending this year" Mahtani commented.   

Mahtani has also recently increased his position in Axis Bank in anticipation of a tightening in monetary policy, which should have a positive impact on the banks which have a strong deposit franchise like Axis. 

He concluded: "We believe that 2010 will see a focus back on quality companies with strong balance sheets. The liquidity driven rally which was led be small and medium sized companies during 2009 has come to an end in my view.''