2012 would be quite a good year for Indian market

When we look specifically at the fundamental valuations of India, the Indian equity market is attractive. Its price is significantly below fundamental value, and we believe the equity market provides a great opportunity to garner cash flows for investors. Similarly, the currency also looks attractive. I think 2012 would actually be quite good. However, there are a number of challenges India that may create problems in the intermediate term.

What are those challenges?
Culturally, entrepreneurship is not very strong in India, and bureaucratic hurdles make it very difficult for entrepreneurs to set up businesses and grow these. From a policy perspective, right now, it is a country focused more on conglomerates than it is on the rest of the population. Unlike other developing economies that are drawing from a lower class and an upper class and creating a growing middle class, India is not. In fact, India almost seems to be becoming more and more bipolar over time. The primary way that an economy can create that middle class is migration from an agrarian to a manufacturing economy. Not a migration from an agrarian to a service economy. Finally, the policies in the education system that are now integrating quotas for the poor are having an adverse impact on overall education. The final challenge in India is grafting corruption. These together mean, in the interim, things are going to be difficult. I would say none of these challenges would surprise any well-informed global investor and are largely priced in 
                                                                                                 ANAND PRAKASH/RAZI ANWAR 
                                                                                                              PGDM 2ND (SEM)