A sharp pullback was seen in domestic equities mainly on weak global cues. Auto stocks continued to remain in flavour as sharp rebound in earnings of select auto companies boosted confidence among investors. Heavy selling pressure was seen in financials, metals and realty stocks, while defensive sectors like FMCG and IT appeared stable today. A kind of profit booking ahead of budget was broadly on expected line. Baja Auto, Hero Motocorp, Hindustan Unilever and TCS were top gainers today, while Axis Bank, Hindalco, ICICI Banks and SBI were laggards.
While underlying strength of domestic markets remains intact, a robust rally here-on looks to be limited in the near terms considering rich valuations of the market which already factored in a large portion of expectations of robust earnings growth. However, external tailwinds pertaining to huge fiscal stimulus in the USA, continued soft monetary policy stance by global central bankers and weak dollar are expected to sustain, which will continue to result in favourable FPIs flow to emerging markets including India. Market is expected to remain volatile in coming days ahead of budget and rotational trading might be visible wherein sectors like infrastructure, real estate, healthcare, building materials, agro-chemical and automobile are likely to be in focus. In our view, while market is unlikely to see any broad-basedrally in the near terms, any meaningful correction will equally be bought out. As valuations of a large number of stocks are trading ahead of their fundamentals, investors must focus on quality stocks which have robust earnings visibility and margins of safety.