Sensex loses 5.44 per cent

All the sectoral indices declined during the week. FMCG and Healthcare indices declined the least,falling by (-)0.57 per cent each. The sectors that fell the most were Realty (down -15.4 per cent) and Metal (down -9.6 per cent). Explaining the resilience of FMCG and Healthcare,Kotak says: “During every correction defensives like FMCG and Healthcare outperform the rest of the market,particularly Banking and Realty.”

Last week’s credit policy review had a significant impact on sentiments. “The tough words used by RBI regarding inflationary pressures made the markets jittery and signalled the possibility of rate hikes in future. But in our view RBI is likely to continue with a growth-supportive policy because the global outlook remains uncertain and domestic recovery is still not comprehensive,” says Kotak.

Regarding the near-term outlook,he says: “In the short term,the markets may see a correction of another 5-7 per cent. But every correction provides an opportunity to build a medium-term portfolio.” He also expects the Indian markets to take cues from the US and Asian equity markets in the short term.

Despite the Indian markets being up by almost 100 per cent from its March lows,Kotak believes that its prospects remain strong over the medium term. “India is likely to remain among the most preferred investment destinations because of strong GDP growth,infrastructure spending,low institutional ownership,political stability,strong liquidity and strong balance sheets,” he says.