Equity Market outlook

Three major events are lined up over the next couple of weeks:

March 6 - Assembly election results: Congress’ role as a kingmaker in Uttar Pradesh will be positive for markets

March 15 - Credit policy: Consensus and our expectations are for a rate cut

March 16 – Budget: Expectations are low and any positive development from fiscal deficit road map may have a positive impact

Global liquidity is favorable with another round of refinancing by ECB through second LTRO to the extent of €530 billion that removed the risk of a liquidity crisis. It is, therefore, constructive from an EM perspective

With market trading at 13.8x FY13 EPS and expectations of an improved earnings growth for FY14, valuations are more comforting. The same along with comforting global liquidity environment and downside risk looks more limited than upside potential from current levels.

Crude oil prices at some point of time will have negative correlation if oil continues to rise and may put pressure on the Indian economy as well as for the markets.

Investment at current levels as well as on any correction, which the market may witness on any negative outcome from the above-mentioned events for a longer period could be a better strategy