G-secs, gold best bets, says Anand Rathi

With the equity markets tumbling, government securities and gold are expected to be safest investment option in long run, predict experts.

According to Anand Rathi, former president of Bombay Stock Exchange (BSE), and corporate advisor, ten years maturity government securities are likely to give 12-15 per cent return in long run with interest rates easing. Thus, the present market offers good opportunity to invest for returns over a longer time span.

Also, precious metals like silver and gold are expected to be a safe investment option, as it has been largely unaffected by recent fall in commodity prices, including oil, added Rathi, while speaking at a seminar organised by the Merchants Chamber of Commerce (MCC) on global financial crisis, in Kolkata on Tuesday.

This apart, more money is likely to flow into bank fixed deposits in the coming months.

Also, during the recent free fall of the stock markets, foreign institutional investors (FIIs) have been the net sellers, and mutual and pension funds in India have held their stocks, he added.

"The stock markets are not representative of the actual valuations. Rather, the present fall is due to distress sale by FIIs," Rathi said.

Yet, corporates should hold their expansion plans at present, warned R S Agarwal, joint chairman of the Emani Group.

"The worst is yet to come, and the present crisis would last for the next three to five years. One should wait for executing expansion plans, but fully utilise sanctioned bank credit fully," said Agarwal.

However, according to Rathi, India was relatively immune to the global financial crisis, as domestic firms had less exposure to debt, banks have no sub prime borrowers and inflation likely to be contained at 5 per cent by next year. "In the last three days alone the outlook of the banks have changed, as they are now willing to give loan to corporate clients. Interest rates have peaked, and they should come down now," said Rathi. Abhirup Sarkar, professor of economics, Indian Statistical Institute (ISI), said in spite of the regulators efforts to inject more liquidity into the economy, the banks were not willing to take risk, and might invest funds into government bonds itself.