Raychaudhuri said he was sticking to his 29,000 yearend target for the Sensex, even as he said valuations are looking a bit stretched in the near term. What happens to the market from here on? First of all, that massive downturn in the markets particularly emerging markets that we saw in January and February, they were possibly too much too soon and the real situation on the ground wasn't all that bad.

Second, around the same time, around mid-February, we saw stance change on the part of the global central banks particularly the developed markets central banks led by the Fed, which clearly indicated a looser-for-longer kind of stance for monetary policy. That in turn lead to stabilisation of the US dollar and that was a departure from the appreciating trend that we had seen over the past couple of years, which in-turn lead to revival of flows into emerging markets and naturally India also benefited from that.

Going forward, we think that this lifeblood equities, which flows into emerging markets are likely to continue for some more time. India typically gets about 25-30 % of flows into Asia ex-Japan and there is no reason why it shouldn't go back to that average. So when we combine these factors, it seems that over the medium-term the rally may continue for longer.

At what level do you think the valuations will start to look attractive again?

To lay an exact finger on this is very difficult but to give you some numbers, the average price to earnings premium that India has traded at compared to Asia ex-Japan is about 30 %. In comparison to that the current premium is close to 42-43 %. So I would think that if the market on a relative basis declines about 6-7 % from here then the valuations would begin to look attractive again.

Which stocks or sectors would you bet on which are likely to outperform?

We still remain positive on the private sector banks particularly those concentrating on retail lending. The second bucket would be the IT services companies particularly the top run companies, which are clearly turning out to be more successful in getting their orders from the developed market companies. Third within the cyclicals, we think that the building material or the cement sector is beginning to look much better than it used to be.

Finally I think some very select utilities, which have visibility about their project commissioning going forward particularly in the power transmission and distribution sector would also fit the bill.