Market Outlook for the Week for May 19th 2014…

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“Election results surprised with BJP led alliance emerging winner with thumping majority while the most opposition parties stand totally decimated. As India braces for the new government and life beyond today, we believe the market will have more legs to the recent rally. BJP led alliance has got in excess of 333 seats which is critical for the stability of the government and its ability to pursue unpopular structural reforms. BJP managed to achieve “Mission 272” all by itself. Immediate task for the new government will be to address the inflationary pressure, focus on fiscal consolidation, kick start the investment cycle and get the economy out of the stalled growth. The mood is the country is upbeat and will boost consumer sentiments, in short to medium term.

Valuations @ 14.9X FY15E EPS are reasonable. Formation of cabinet and Union budget will be the next areas of focus for the investors. Union Budget become important to understand the government focus. Markets are expected to move up in the coming days as market performance is more a reflective of the expectations going forward rather than past quarterly earnings. We are in LONG TERM BULL MARKET with EQUITY likely to deliver superior return than any other asset class. Money sitting on the fence will make it’s way into the market in coming days”.

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