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Indian Stock Markets - Strategy March 2009

Market Strategy :
The benchmark indices remained range bound during the past month. Weak global markets and absence of fiscal stimulus measures weighed on the markets. The Vote-on-account, which was presented during the month,failed to cheer the markets as the Finance Minister did not offer any specific measures to further stimulate the economy. At the same time, the vote-on-account highlighted the elevated level of fiscal deficit.

On the US front, investors treated the new Financial Stability Plan with skepticism over lack of details. Markets in the US tumbled to multi-year lows. Economic activity shrunk appreciably across major regions. Fresh concerns on deteriorating prospects of emerging European economies resulted in weak eurozone markets.

The quarterly results have not provided any additional visibility on prospects in FY10. The excise duty cut has largely failed to have any meaningful impact on the respective sectors stocks.

With no more macro triggers expected in the current quarter, we expect markets to take cues from the events in the international markets. We note that, the international markets have remained weak in the past few sessions. Over the next three month, markets will also start focusing on the general election and its possible outcomes.

Valuations at about 10x current year earnings, are not demanding. However, we believe that, the markets will follow a longer - term trend only once there is further visibility on FY10 growth.

In the backdrop of a challenging economic situation, we believe that, companies which benefit from Government spending (in construction, capital goods and power / power related sectors) and select FMCG companies (which have not yet been impacted by the slow down) will find favour with the market.