Now that RBI to up rates, which sectors still safe haven?

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It's a quietly positive day at the market. The inflation spike dampened sentiment, but the market managed to keep its head above the water. The Nifty traded in a narrow range and finally closed at 5,500, gaining 17.70 points. The volumes were low but the positive global cues kicked in to push the Sensex 42.63 points higher to settle at 18,308.66.

C Jayaram, ED, Kotak Mahindra Bank feels that the market has already factored in inflation and interest rates and is likely to stay high over the next  three to six months. Jayaram, however, thinks both inflation and interest rates may taper down by the end of this year.

According to Jayaram, interest rate is likely to be hiked by only 25 basis points. He explains that if the rates are in between a 50 to 75 basis points increase over the next six to nine months, then it banking sector is likely to lead the way whenever markets pick up.

Know what other analysts are saying: Louise Yamada sees further risk in Indian equities

Noting that monetary aspect of the battle against inflation is nearing its end, David Pezarkar, Head - Equity, Daiwa Mutual Fund said that maybe there could be another 50 bps hike from now to another three months or maybe 75 basis points at most. "So I think the government will have to somehow encourage more and more capex to attack the supply side of the equation," Pezarkar adds.

Pezarkar believes that the market is likely to remain sluggish. However, Pezarkar thinks that the market might not dramatically fall from this point as valuations appear to be a bit attractive. "But the upsides also as of now seem capped," Pezarkar warns.

Pezarkar advises buying capital goods and pharma stocks and avoid FMCG space all together.

"I think interest rate sensitives, one would still have to avoid because the negative sentiment is likely to persist in those sectors even for some more time," Pezarkar adds.

Pezarkar is positive on the textile space as he  thinks that there will be some action from the government point to encourage activity in all the sectors which are high employment oriented.

Meanwhile, Devangshu Datta, Consulting Editor, Outlook is maintaining a bearish outlook on the market. He advises waiting for market triggers as it has really not made a decisive move either way of 5400 or 5600.

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