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By Dipen Shah, Head – Private Client Group Research, Kotak Securities:

With the recent trend of volatility and fluctuations, the Indian markets continue their edge-of-the-seat performance. However, markets impressed investors by ending the previous week on a high, gaining up to 4% on benchmark Indexes.

The change of guard at the RBI (with Raghuram Rajan taking over from the erstwhile D Subbrao) and the reduced tensions on the Syrian conflict have been the important reasons, which have helped bolster the Indian markets.

The slew of initiatives announced by the incoming Governor have helped change sentiments, both in the currency and equity investment markets. The Rupee seems to be showing signs of appreciating. The initiatives are expected to bring in significant USD inflows and thereby, lend strength to the INR.

With the rupee on an upward trend, banking stocks gained significantly. Other rate sensitive sectors also rose handsomely. On the other hand, stocks in IT, Pharma and FMCG were relatively subdued.

The escalation of the Syrian issue had led to a spike in crude price and depreciation of rupee. With a possible de-escalation of the issue, the trends have reversed and that has also provided optimism to the markets.

It is important to note that, the RBI initiatives have just been announced and have not taken effect, as yet. We will need to wait and watch for these initiatives to yield results before taking a concrete call. The investment climate in the country needs to be made more lucrative and attractive and more initiatives and reforms will be needed to strengthen the rupee, which may take time to materialize.

Our advice –
Markets have gone up in recent past and may retrace some of the gains. Accumulate (buy at each decline) stocks with a long term perspective. Remain with the blue chip stocks and sector leaders. Diversify your portfolio by buying stocks in defensive sectors like IT/Pharma/FMCG and also some of the beaten down sectors like Capital Goods/Banking, etc. The important triggers in the near term are the policy meetings of the US Federal Reserve as well as RBI.

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