Indian stock market is expected to witness increased volatility in 2008 on the back of global trend and investors should focus on firms with strong earnings and quality management to earn profits, a global investment management company has said on Tuesday.

“We go into 2008 with economic data still robust, the government plan of infrastructure spending of about $400 billion on track, but on the backdrop of developments in international markets and high valuations, we expect the Indian market to see high volatility,” Fidelity International India Fund Manager Sandeep Kothari said.

Solid balance

Given the increased level of uncertainty, diversification would be essential and investors should identify companies with strong cash flow and solid balance sheets, the firm said in its outlook for 2008.

“In our view, the corporate earnings outlook continues to be reasonable,” Kothari said. The view is in contrast to the market expectations that earnings growth for FY09 may slowdown to about 16 per cent as compared to 18 per cent for financial year 2008.

Regarding the outlook for the fixed income market, Fidelity International India said that the moderating credit growth in the country and possibility of further Federal rate cut in the United States have improved the sentiments in this segment.