On market volatility: We expect volatility would continue, given that next week we would have the results of the state elections, then going into the general elections as well. But for the markets as a whole, the fall in oil prices has been a complete blessing in disguise. A couple of months ago, we were really worried about the domestic macro, given the fact that oil prices had moved up so significantly. Now, you have a scenario when current account deficit increased over the last year, but it is still manageable. You have inflation coming off and RBI is signalling that the rates could stay on hold for a period of time.

On earnings growth: We did see a considerable amount of earnings downgrades but if you look at Nifty as a whole, even for Q2, Nifty reported almost 10 per cent earnings growth year-on-year which is not a bad number. If you exclude a couple of names, especially in the corporate banking space, the numbers looked fairly good. Now, we have reasonable estimates for the year where we are talking about a low double-digit earnings growth for the Nifty. All of that means market is now at a fairly more reasonable valuation level. It is still not attractive enough, but clearly, valuations which were looking stretched have come off. Especially in the mid and the smallcap, where there was a lot of froth, valuations have corrected and are closer to the largecap valuations. So in the midcap space, if one has a longer term horizon, there are definite opportunities one could look at, given good quality, good growth and valuations are also reasonable.

On Auto: We have seen that even prior to the festive season, there was a slowdown in trend in terms of auto numbers. There was a hope that post the festive season there would be a pickup in demand, which has clearly not come through and numbers have been weak across the board. This month, even the CV numbers were on the weaker side. The only space where the numbers seemed to be holding and fairly okay is the tractor space which is reflecting more of the rural demand and the rural economic growth. This trend, in terms of a little subdued consumer demand that is happening in the auto PV side, could continue. CVs could get a boost next year, especially prior to the new emission norms, but we will have to wait and watch for that. Overall, we have seen there has been some signs of deceleration in consumption and the huge amount of buoyancy, that you were seeing, has started to slowdown. Even in the GDP numbers, that came out earlier in the week, it is clearly evident that private consumption expenditure at the margin is seeing some signs of slowdown. It could possibly be an impact of what is happening in terms of availability of credit from the NBFC sector and the tighter liquidity conditions, plus overall demand. So yes, there would be some degree of deceleration in the near term. It is not that consumption growth is going to come off considerably, but from the higher levels, there could be some deceleration in terms of overall demand in the sector.

On Pharma: Overall, pharma as a sector is where we believe that worst may be behind us. We are clearly approaching the sector on a stock specific basis. If you divide the sector into two parts, especially what is happening on the US generics market, and you look at the domestic market, our clear preference is to companies which have presence in the domestic space where growth has been fairly buoyant. Our expectations are that growth would continue despite some regulatory overhang that could be there from the government's side. On the US generics market, the price decline that you have seen because of competition, has abated, but it is still there. So, there is pricing pressure, but not what we have seen in the last few years. However, what we have to contend with is the fact that the overall lifecycle of the complex generic products has shortened considerably. There will be faster approvals and, therefore, there will be competition in the space. So, one has to be very selective when we are picking stocks overall. So net-net, our favour has been towards what is happening on the domestic pharma space where we believe growth is far healthier than what it is on the US side. On the pharma space as a whole, valuations valuations still have not come into a very attractive range and estimates are still fairly elevated across companies.

Other macro themes: There are a few sectors on which we are positive. Firstly, we are positive on the private corporate banks, where asset quality stress appears to have peaked out; it would improve, slippages would more or less stabilise and credit cost would come off. Most of that would start reflecting next year which would help them improve their ROEs.  Also, these are banks which have very strong liability franchise, but we have seen an improvement in loan growth for the entire private sector banks, given the fact that PSU bank growth is under constraints, that is happening in the NBFC sector. Valuations still seem fairly reasonable in the private corporate banking space and there appears to be a turnaround, especially in terms of improvement in ROEs, over the next year or so. So, this is one sector where we are positive on.

On Capital goods/Infra: This has been a laggard now for a fairly long period, but at the margin, if not immediately, we are starting to see some green shoots in terms of capex recovery. It may not be something that could be visible over the next three, four months; it might take slightly longer. However, we are now in a scenario where overall capacity utilisation in the overall economy across sectors has started to move up and has finally moved up over its long term average. It is still not at its peak which means that over the next six to eight months, you could possibly start seeing fresh capex happening in the sector. So far, most of the capex has been public spent and government is focussing on roads and railways. The private capex has been absent, so that is something we would want to watch out for. We believe that over the next eight, 12-month period, there could be some revival; we are looking at opportunities in this sector as well.