The bullish undertone in the Indian markets is led by the liquidity from foreign investors and sentiment change on a likelihood that there will be a stable government at the Centre post elections, said Harsha Upadhyaya, chief investment office-Equities, Kotak Mutual Funds. He believes the near term bullish undertone for the market will continue driven by sentiment and liquidity.

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However, the key to the sustenance of higher levels in the market is earnings season. Corporate banks are expected to deliver better earnings than the manufacturing space, he said.

On sectors, he said it is the beginning of a new cycle of profitability for the cement space. Volume growth for the sector was good but pricing was missing. Now, after some consolidation in the sector, one is likely to see further price hikes leading to profitability, said Upadhyaya. Moreover, capacity addition for the sector is also minimal, which will aid price hikes.

The house would continue to maintain their underweight on auto sector overall, he said because at present there is excess inventory in the system. So profitability for the sector would be under strain, which is unlikely to change in the near-term. They may look for opportunities at lower valuations or when some of the inventory issues get cleared.

With regards to IT, he said Kotak MF expects the sector to be a market performer but not an outperformer this year. The sector is expected to witness steady earnings growth and not too high, he said.