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Templeton Mutual Fund on the Implications for Equity and Debt Markets

Templeton Mutual Fund -: We expect certain degree of volatility in the short run

First we would like to express our sympathies for the American people, who have been a victim of this tragedy. Being the bedrock of financial markets, and world's largest economy, any adversity in the US is bound to affect all economies worldwide including India.

The implications are economic as well as political; and we feel that this is not the last on the issue. Clearly technology advancement would increase the seriousness of long term threats and with instant media coverage, information flow, lower tariff barriers and cross border capital flows, the world is truly a global village.

However, India is still relatively insular and enjoys the advantage of a huge local market and has problems of its own which it must tackle while keeping in mind the increased overseas uncertainty, both political and economic.

At Franklin Templeton, we buy stocks of companies and while there may be short term reactions as investors look for a safe haven or otherwise speculate on the economic implications of this tragedy, we believe the resilience of our portfolios would stem from companies perceiving the changed global equations in order to sustain a return for their investors. For us finding those long terms trends are more important than timing the current market. We believe investors should also follow the same approach.

As regards the fixed-income funds, the Indian debt market and currency market are behaving in a fairly stable way. The Finance Minister and the Reserve Bank have both re-iterated their commitment at maintaining the orderly functioning of the markets.

At Franklin Templeton, we continue to stress on the fundamental aspects of fixed-income markets over the medium-term like inflation, industrial growth, credit demand, fiscal deficit, currency & commodity markets and liquidity situation. While at this point it is difficult to assess all the implications of this tragedy, we continue to watch the market dynamics carefully.

Needless to add, in the short run, we expect certain degree of volatility as markets grapple with this news. At this point, we however maintain our stance of stable interest rate outlook in the medium-term and remain focused on optimising risk-adjusted returns for clients.