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"During a correction phase in the market, like the present one, there will always be counter moves, which will facilitate a bounce back. This can happen any time now. The huge liquidity at the disposal of the DIIs can trigger this bounce back. But such a bounce back is unlikely to sustain since the fundamental factors are unfavourable. The Trump factor has triggered many profound changes in markets already. The dollar index is strong and rising and is currently at 106.61. The US 10-year bond yield is at 4.48%. These two are strong headwinds for equity markets in emerging economies like India. The positive factor is the huge liquidity at the disposal of the DIIs and the sustained flows into these funds. Domestically, the worry is the disappointing Q2 results and the consensus earnings downgrade.

How long can these flows sustain? How early can we expect a rebound in earnings growth and strong GDP indications? These are relevant questions for which we will have to wait for answers. Meanwhile investors will have to stay with quality stocks in sectors with strong demand."