Vikaas Sachdeva, country head, business development at Bharti AXA Investment Managers talks to Innovative Investor about the outlook for the Indian markets in 2009, and what manufacturers need to do to rebuild trust in structured products.

What are the most important lessons to learn from 2008?

During the past bull run in equities, investors seem to have forgotten the importance of asset allocation and many investors were over-exposed to equities which has resulted in a sharp decline in portfolio values. It is imperative that investors go back and revisit their asset allocations and ensure that their portfolios are suitably diversified across asset classes depending on their individual risk profiles and investment goals.

How will the Indian markets specifically fare in 2009?

We believe that the correction in valuations has been rapid and discounts a sharply reduced earnings per share expectations for FY10 adequately. However, volatility is expected to remain high on account of economic data flow and the January results season, which would all confirm the economic downturn. Businesses, particularly in the real estate, autos and commodities (excluding cement) sectors would have borne the brunt of the slowdown.

In terms of dataflow, we expect the December quarter results to be the inflexion point. The fourth quarter results should be significantly better than the quarter three results on account of lower inventory losses.

Given the fact that valuations are already one of the lowest that we have seen over the past two decades and the fact that in terms of fall from the peak, the current fall is already larger than the corrections that we have seen over the same period, we believe the degree of downside may be limited and there is a good probability of the market registering a significantly positive return between now and vote on account 09.

What are the biggest opportunities and challenges for you over the next six to 12 months?

We expect the fixed income rally to continue over the next six to nine months and there is a huge opportunity to mobilise retail money in these funds. We feel the returns going forward are going to be very attractive and investors should look to reallocate money in fixed income funds. However, the biggest challenge will be winning back investor confidence after the recent concerns over the portfolios of some fixed maturity plans and liquid funds.

On the equity side, we believe that the time is right to invest in a disciplined, systematic manner in diversified equity funds. Investing in a systematic manner over the next six months and then remaining invested over the next three years should generate attractive returns.

What product features are clients looking for in this challenging investment environment?

One of the key learnings from the recent market volatility is that investors require simple products that are easy to understand. Furthermore, it has highlighted the importance of disciplined systematic investing. Our new D-SIP solution enables investors to benefit from market volatility in the near term by participating in the market on every day.

What exactly does your D-SIP proposition offer investors in this market?

D-SIP is a packaged investment solution enabling the customer to benefit from market volatility in the short term through daily rupee cost averaging. It offers the investor convenience of small ticket size and a short investment commitment period. The added benefit is that D-SIP has no entry load and a staggered exit load, which encourages long-term investing in equities. Investors have nine alternatives to choose from - daily investment amounts of either Rs300, Rs400 or Rs500 for a period of one month, two months or three months.

What must be done by manufacturers and distributors to regain confidence and trust for structured products?

Going back to my earlier statement, I believe that the lessons learnt from the recent developments is that simplicity and transparency in product design are extremely imperative. This holds true for structured products as well. Investors need to have a clear understanding of the product they are investing in. It is important the product needs to be sold as per the investor's specific risk tolerance.