Market Outlook…

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Last week, Indian equity market remained highly volatile with sector specific movements as Bankex was strong with gain of 3.1% while IT witnessed correction of 3.9%. There was a sharp rally in banking stocks on the back of falling crude, lower than estimated inflation (6.5% CPI, 2.4% WPI), lower probability of US interest rate hike in near term and higher probability of positive outcome in state election.

Banking results represented by Indusind and Axis Bank have so far been healthy as per expectation. On the other hand, IT stocks were heavily hit as Q2 earnings of TCS and HCL Tech earnings were just in line with estimate. Besides, the global slowdown fear also adversely impacted the stock prices. There are concerns that the government of Greece is likely to default while the cut in Germany growth forecast further signals that the Eurozone recovery has been sluggish.

Decline in Brent Crude continued as it fell by 3.8% WTD to $87/bbl. Key sectors where earnings are likely to remain robust are Pharma, FMCG, Cement, Oil and Gas, Pvt Banks and Auto.

In short to medium term, we believe Indian equity market is likely to trade in the band of 7650-8050 Nifty levels, led by lack of any key triggers and global growth concerns.

The outcome of state election is expected on Monday which could set the direction for Indian markets. Besides, Q2FY15 earnings will be the key to watch out for. Recommend investors to take stock specific approach where earning growth momentum is strong.

Every dip should be used to accumulate this kind of companies.

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