One will think the market will weigh valuations against earnings. Results, both in India as well as abroad, have largely been encouraging. But, dig deeper and one may find it was mostly due to reduced costs rather than rising topline. The classic revenue-driven growth will take a while to materialise. And, so will the overall economic activity.
On the whole the undertone is expected to remain cautiously optimistic. The news flow and a whole host of data points will mostly be positive. The markets could rally further if they turn out to be stronger than anticipated. However, selling pressure at higher levels can only be expected.
A big concern is the deficient monsoon, and its possible adverse fallout. Farm output could get hit, which in turn will push the already high food prices. What could add to the inflationary woes is the Centre’s bloated fiscal deficit.
