Market may remain sideways till Fed signals rate pause: Ajay Bagga

economictimes.indiatimes.com:

«Until we get a signal from the Fed, either in September or November, that they are done for this rate cycle, we could see sideways markets. India is in a sweet spot economy wise but we are getting impacted by the global issues and the FII outflows are hurting our markets,» saidindependent market expert Ajay Bagga. Edited excerpts:All eyes will be on the MPC outcome next week. With inflation soaring, do you think we can expect a pause or can we expect a hike from the MPC?I think RBI will still be in a pause mode but in terms of the outlook they will stay withdrawal of accommodation.

Right now there is no reason to hike further and a rate cut is out of the question until we get more clarity on the Fed. The big issue is the differential with the US interest rate. RBI watches that very carefully and now we have seen compression of that differential.

We are expecting some comments on that as well. But overall, we are looking at a pause and no change in the policy stance; the inflation forecast might be hiked a little bit for the next two quarters on the base of vegetable and food prices going up. Also, the oil price going up will be mentioned by the RBI.

That has a cost-push impact on the economy.We are at the fag end of the earnings season and so far we have seen a mixed set of numbers. How do you read Q1 earnings performance?It was mildly disappointing, I would say. Downgrades are more than upgrades.

We were expecting banks to do very well, 2 times to 4 times kind of profit growth in auto, chemicals going down, cement showing poor numbers, infrastructure doing well, telecom posting poor numbers, IT flattish with flat-to-negative guidance. It has come out on par; so that way the forecasts have been correct. What has been