Rakesh Arora, MD & head of research at Macquarie Capital Securities (India) told NDTV Profit's Prashant Nair that markets are likely to be range bound until things clear out.
"If promises made by the PMO fructify in any way, we could see a big rally," Arora said. Earnings and monsoons remain the key hurdles for the markets, he added.
Outlook on markets: Remain bullish because seeing some uptick in the infra space and that is getting reflected in the steel and cement demand. We are not hoping for big bang reforms. Markets need to consolidate and go down a little before investors come back.
Earnings expectations: IT companies are likely to cut their earnings growth forecast. Most IT firms are also likely to report forex losses. The underlying earnings would be ok, but reported earnings could be hit because of the mark-to-market provisions most companies will have to make.
Monsoon: The rainfall has been 33 per cent deficient so far and sowing areas have been impacted.
1) IT: Have downgraded IT stocks to underweight because there are demand worries and rupee seems to have bottomed out.
2) Consumer discretionary: Overweight. Maruti Suzuki, Tata Motors are the top picks. Deficient rainfall is the only spoiler in the consumer discretionary story.
3) Financials: Underweight on banks because the NPA cycle is likely to continue for this quarter or the next quarter. Refrain from going all out on the sector. Pushing banks like HDFC Bank, ICICI Bank. SBI has seen strong rebound from the lows. The stock is likely to consolidate at current levels for a couple of quarter before growth visibility comes in.
4) Metals: Underweight because of concerns about China's growth and rest of the world is also not looking happy. Coal India, NMDC, JSPL are the top picks.
5) Telecom: Regulatory overhang has meant little investor interest in these stocks. Need regulatory clarity before any uptick. These companies have high debt so mark-to-market currency losses could be high. Investors should wait and watch. Bharti Airtel is the top pick.