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Indian markets are unlikely to see a significant rally until corporate earnings improve, as recent Q2 results led to steep downgrades, particularly in the oil refining sector. Experts suggest that it may take another 2-3 quarters for a meaningful recovery, with current valuations appearing stretched. Investor sentiment remains cautious amid foreign outflows and a strengthening dollar, with Q3 results seen as a potential catalyst for market movement.
Infrastructure stocks may regain attention following the BJP's victory in Maharashtra, but railway and defense stocks, which have plummeted up to 40% from their peaks, remain out of favor. Analysts express concerns over their elevated valuations despite recent corrections, highlighting a significant gap between stock prices and profit growth. Execution efficiency is deemed crucial, with smaller firms potentially outperforming larger players due to their ability to address backlogs more effectively.
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