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"The sharp 8% pullback in Nifty from the June lows of 15183  is all set to continue aided by a flood of good news. First, the US markets have rebounded sharply driven by impressive corporate earnings. Second, FPI selling appears to have bottomed out. FPIs have bought 5 days this month. The dollar index declining to 106.6 from above 108 is likely to persuade FPIs to buy rather than sell. Third, the relief announced by the government for the petroleum sector through reduction in windfall tax and cuts in duties on exports will be a major boost for the sector, particularly for RIL. However, investors have to exercise some caution because selling may reemerge at higher levels. Results from the leading financials are likely to be good and the ongoing rally may continue. After the recent correction IT valuations are attractive. If the US succeeds in avoiding a recession, IT will bounce back smartly."

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