Impact of fed rate cut
- Overall positive for emerging equity market due to increase in foreign institutional flows
- Liquidity concerns that emerged due to sub-prime crisis will get offset
- India to be among the out performers in the emerging markets
- Lower dependency on exports
- Domestic consumption growth remains intact (more so backed by good monsoon)
- High real interest rates
- RBI is in good position to counter any adverse developments with contained inflation
- Rupee to strengthen following dollar weakness
- Positive for FII in view of higher dollar return
- Negative for export oriented sectors
- Fed action more aggressive than the expectation highlights risk of US slowdown which will adversely affect global demand
- Commodities likely to see correction on the base of demand slowdown
We continue to recommend overweight on domestic consumption and infrastructure related plays and underweight on export oriented plays.
Our top picks are ITC, SBI, PNB, Bharti, L&T and DLF among large caps.
Positive for sectors
- Industrials/Infrastructure
- Financial services
- Real estate
- Telecom
- FMCG
Negative for sectors
- IT
- Textiles
- Auto components
- Metals
Neutral
- Health care
- Consumer discretionary
- Cement