“Globally, we are in a Goldilocks environment with good macros as you defined it, we have inflation which is trending down though it is persistent in the journey from 3% to 2%, it is showing some persistence but despite that central banks are talking about rate cuts,” says Ajay Bagga, Market Expert.

Since we have seen March was clearly a month where a lot of adjustments happened financially, this was a truncated week and then a lot of tax harvesting. But now what lies ahead for us. Let us not forget big cues coming in from the domestic market when BJP also launches its manifesto. What are you picking and how are you gearing for the next week and especially for the April series now?

See, now the immediate catalyst for the markets will be the earning season. Politically, the markets have discounted political continuity and stability, it is a matter of numbers from 320 to 400, what are the numbers like, but more or less the markets have discounted continuity and that as far as politically the biggest catalyst will be the July union budget, what comes with that, but right now what the markets will be keenly looking at is the start of the earning season.Globally, we are in a Goldilocks environment with good macros as you defined it, we have inflation which is trending down though it is persistent in the journey from 3% to 2%, it is showing some persistence but despite that central banks are talking about rate cuts.

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So, if the first quarter was one of anticipation of a rate cuts, the second quarter will be one where we will be seeing imminent rate cuts either in June or July the rate cut cycle will start, the Swiss National Bank already cut rates as the pioneer, but I think ECB and Fed moves is what the markets will look at, but overall global micro is relatively robust.

China I think there is a recovery coming, so by the end of the second quarter you will see an incipient recovery in China, the stimulus working will help out China as well and that will really boost market sentiments. Monsoon is looking normal. The first initial talks is of a La Nina setting in and covering most of the Indian subcontinent rainfall this year, so that will be a big boost to rural consumption and we are seeing the consumer stocks moving in anticipation. So, continuity, stability, good global micro, good Indian micro, a trending downwards inflation and on top of that you heap in rate cuts coming in. I think we have a lot going for these markets in the quarters ahead.

Since you have also mentioned the corporate earnings, the Q4 earnings, which will be a key trigger to watch out and we know that Indian valuations have always been steep. Now, what do you make out of Q4 earnings because one part of the argument is this also that the easy basket buying which was there from the last two-three years has also gone by. We need to be very selective and earning-based stocks will only move. What do you make out of the quarter four earnings?

At near to all-time highs that is a truism that any earnings miss leads to a much sharper correction. So, we are priced to perfection or maybe ahead of perfection, but we are expecting a pretty good earnings season.

The sectors that will really shine up would be autos, industrials, capital goods. IT, there will be challenges as we saw with foreign IT companies giving poor guidance, our IT stocks also got hit.But I think IT is a contra bet and two quarters down the line it might be a very different situation, especially given the way our IT majors are remodelling their service delivery towards AI, towards data and machine learning which were already there, but a lot of AI projects will now start coming.Globally, what will happen is now the wide dispersion of AI into supply chains, into the manufacturing chains, as well as the service utilities will start and our IT companies will be well positioned for that.

It might take two quarters, four quarters for the market to start recognising that, but I think the IT sector could be a contra bet. Banks I think come back, especially the PSU banks. There is a lot of foreign investor interest that is now rising in the public sector banks.

So, I think banks and NBFCs will again start performing and you could see some amount of interest. Pharma, you already mentioned, I think pharma is again well positioned. The issue with pharma is the compliances and one after the other some FDA or something comes in and that disappoints investors.

But overall, the sector has got a lot going for it. So, industrial, capital goods, railway and defence will get the next boost from the union budget. Again, industrials, infra will continue to do well and consumption comes back. I am expecting a better monsoon and rural demand to pick up after nearly two years and consumer stocks are already positioning for that.

I think consumption demand will start coming back. Metals, as Aditya mentioned, China will be the big arbiter of metal prices and I think Chinese recovery leads to better metal prices, better realisations this year.


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