High net-worth individuals (HNIs) have already moved from equities to structured debt products to signal the flight to safety. The fog of global uncertainty hasn't quite lifted. On the contrary, economist Paul Krugman has predicted the makings of the third Depression. To cut a long story short, it will, therefore, be more difficult to construct a portfolio that will return as much as the one we chose last year.
In a fast growing economy, there are bound to businesses that will deliver better than average returns. We tend to lean towards the views of experts who reckon that the valuations of Indian markets at a P/E ratio of 18 times 2010-11 earnings cannot be considered as expensive. The historic average tends to be 20, while a ratio of 24 could well enter the danger zone.
