Market outlook - Geojit BNP Paribas Financial Services Ltd

- It was expected in mid May that the Indian market could outperform because of decline in commodity prices and potential improvement in policy environment. But, currently it seems that the drivers of outperformance are behind us and the market could underperform in the near term.

- It seems that India's outperformance was driven partly by hopes of policy reforms post the Presidential election. But, apart from domestic diesel price adjustment and roll back of some GAAR provisions, no reforms are likely in near term.

- It seems that a Sesex level of 15700 to 16000 is possible. This implies the possibility of a 5-7% correction from the current level.

- YTD, FIIs have invested USD10.2 billion in India - 73% of total inflow into Asia-6. After the strong inflow in January-March, inflows tapered off in April-June, although FIIs did not sell India aggressively even then.

What to sell in the market?

- It is logical that high beta stocks (e.g. ICICI Bank, L&T, Tata Motors, SBI etc) would decline more than the market in a correction phase - and that includes some stocks that we fundamentally like. Investors not averse to trading in and out of such stocks may take advantage of such trading opportunities.

What to buy now and after the correction?

- Four themes are expected to work - infrastructure companies with strong balance sheets and proven execution, consumer staples and related companies,foreign currency revenue generators and select cyclical.( in anticipation of a rate cut and industrial revival later this year)

Source : Equity Bulls

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