Does the present downturn offer a good opportunity to invest?

IS THIS A GOOD TIME TO INVEST IN VARIOUS ASSET CLASSES LIKE PROPERTY AND SHARES?
We are seeing a situation in which value of all asset classes have crashed by more than 60 per cent during the last 12 months. If oil prices get stabilised at these levels for the rest of the year, I am not expecting any cut down in government spending. Easing liquidity constrains and falling interest rates is expected to bring down inflation this year. Valuations are looking very attractive in shares. Another important factor is the intervention of market stabilisation fund. Investors should start thinking about investing in stock markets with a long term perspective. As with any other investments, these should be carried out in a phased and disciplined manner. Property prices in my opinion were at highly unrealistic levels before the crash. Though the prices have corrected, the subdued economic activity might keep the property prices at lower levels.		Property prices have not risen in the last quarter. In fact there is a downtrend. It is better to adopt a wait and watch approach as there is more room for a mark down in this sector. As for stocks and shares, some of them are on the market at the most attractive valuations. So one can pick and choose and invest regularly to take advantage of further markdowns owing to other economic factors.
HAS THE MARKET BOTTOMED OUT OR DO YOU EXPECT A FURTHER FALL?
The MSM had crashed by more than 65 per cent from its peak levels in June last year. The introduction of the market stabilisation fund as well as oil prices stabilising at $40+ levels are expected to be the major motivating factors for the stock market. Given the current scenario, I do not see a possibility of MSM breaking its recent lows in the immediate future. However, any further correction in the global or regional equities would definitely be having its ripple effects in our market as well.		That is the million dollar question. Anybody who can answer that question would be a guiding force in the world economy. Jokes apart, there is scope for further bottoming out as there are an unimaginable array of factors that are at play. I would expect that it will be the middle of 2010, when some sort of rise will be seen.
WHAT KIND OF RETURNS CAN INVESTORS EXPECT IN THE SHORT TO MEDIUM TERM ON SUCH INVESTMENTS?
The average dividend yield for MSM companies is in excess of 5 per cent. This is among the highest in the entire Middle East region. Apart from this, companies are generous in giving bonus shares which leaves the possibility of further capital appreciation in the future. Playing short term in the current market conditions, where volatility is very high, can be very dangerous. Short term swings in share prices can make short term investors wary of exiting their investments. I suggest making systematic and disciplined investments spread over a period of time targeting long term gains.		One cannot expect the kind of returns witnessed in 2007! On a prudent mix of investments consisting of bank deposits, government securities and a few dividend yielding shares, any return in excess of 5-6 per cent can be considered as an achievement. In the medium and short term the objective should be to avoid erosion of capital. Maintaining of a certain ratio of liquidity would be of utmost priority.

 
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