Indian markets have corrected 9 percent from their June record highs turning investors cautious with the macro data pointing towards a slowdown and foreign investors pulling out from equities. The Indian market correction has been led by multiple factors like the expectation of a reformist budget, fatigue because of tepid earnings growth, continued NPA problems and failure of IBC in quick process resolution. Moreover, the market experts do not expect the sentiment to improve any time soon and indices are expected to remain range-bound, however, but broader markets could see a boost.

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An Equirus Securities report stated that relative valuations indicate that mid and smallcap underperformance is unlikely to continue which has led them to give higher weightage to small and midcap stocks in their portfolio.

Though the broader markets are starting to see a recovery, large-caps remain the preferred choice for investors. The BSE Midcap index has fallen over 12 percent in 2019 as compared to a 3 percent rise in BSE Sensex.

From a strategy perspective, Equirus recommends going overweight on our small and mid-cap as well as on sectors like BFSI, pharmaceuticals, and metals.

"We have an equal-weight stance on auto, consumer durables, IT, FMCG, cement and utilities, and an underweight one on capital goods," they added.

Their preferred stocks include SBI, ICICI Bank, Mannapuram Finance, Cipla, Baja Auto, VIP, Voltas, Sriram Transport, TCS, and Tata Steel.

Other than equities they prefer gold and steel among metals. Policies of the Donald Trump administration have exposed dollar to the risk and the global dollar reserves are declining as the Euro is replacing the dollar in global trade, and the Yen is coming back in flavour. The unabated China-US trade war can bring inflation to the US, while Trump policies can jeopardize the Petro-dollar, which was an important sink for the dollar. All these can bring the Trump dream of a weaker dollar to reality, much faster than he would have anticipated, the report added.

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First Published:Sept 10, 2019 12:07 PM IST