Views and Outlook on Markets - Teena Virmani, Vice President - Research at Kotak Securities

"Domestic markets witnessed huge volatility in the month of February 2018 post Union Budget announcements on rising bond yields as concerns started emerging on government's fiscal imbalances, higher inflationary pressure. Global markets also witnessed a correction with pressure coming from rising bond yields.

After witnessing better than expected GDP data for Q3FY18, domestically, the focus of the markets in immediate near term will be on passage of Budget in parliament session, GST council meeting and implementation of e-way bill as well as advance tax collection figures by mid-March. Globally, all eyes will be on new Fed Chairman decision on interest rate hikes. Stronger outlook for economic growth in US has raised the likelihood that further policy firming is on the way. Global yields as well as oil prices will also be continuously watched out for.

Benchmark indices are currently trading at 17.9x /15.2x on FY19E/20E valuations. Valuations have come off from the recent highs which makes large caps a preferred play. Mid-caps after witnessing correction are still trading at higher valuations than large caps so we do not rule out further correction in them, if earnings falter in the coming quarters. However, we would prefer select midcaps where strong earnings growth is likely to maintain higher valuations going forward".

Source : Equity Bulls

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