The July-September quarter has been a see-saw ride for Indian markets and as we enter the winter months, there persist plenty of questions about performance, delivery and safety of equity markets. Firstly, Nifty and Sensex ended flat the quarter and the rupee too recovered a lot of ground from the abysmally low levels of 69 against the US dollar. Bond yields softened from the peak of 9.5% for 10 year government securities. Having said that, quarter ended Sep’13 was perhaps the toughest one for traders and investors alike especially in the month of September. But the market has been on fire since then.
 The Nifty and Sensex recorded their lowest level for the calendar year 2013 in the month of September only to bounce back to near their highs of the year, something which tells the tale of unrelenting volatility that prevailed in the quarter for equities. The same was clearly visible in the bond and currency markets as well, as threats of downgrades from various rating agencies at various levels loomed large.
Traders were cautiously optimistic about Q3FY14, but caution seems to have been thrown to the wind pretty early with the Sensex hovering around its lifetime high of 21,000. In this special report we try to identify the quarterly price behaviour of various asset classes with a special focus on Indian benchmark and sectoral indices. Based on the results, we try to plot the trend for the December quarter using various statistical tools such as probability, standard deviation and variability (we’ll spare you more heavy duty details) and identify some stocks in the Nifty 50 universe that could outperform.  
 When we analysed the performance of the July-Sep 2013 quarter, we found that the Nifty and Sensex managed to hold ground.  They posting flat to marginally negative returns in spite of severe drag from the rate sensitive sectors like banking, real estate, capital goods. At the same time, positive returns from the  auto index was a surprise considering that it too is sensitive to rate  fluctuations. FMCG, technology and healthcare indices were clear winners whereas metals surprisingly found a place in the Top Five sectors with positive returns over the quarter. Going forward, we expect the Indian indices to hold above their previous quarter lows. Yes there would be some amount of drag related to earnings season, which is already factored in the stock prices of Nifty 50. Surprises, if any, will come in the non Nifty 50 space and that is something one needs to watch out for.

Bonds and Currency
Bond yields in India appear to be on the path of sideways consolidation. The range for Indian 10-year G-Sec paper for the October- December quarter is expected to be 8.15%-9.08% which implies that there would be some amount of volatility in the yields, and the rupee too is expected to trade within a much smaller range compared to the wildly swinging ways of the previous quarter.
Equities
We expect equities as an asset class to capitalise on its rebound seen in the month of September. We also see stellar performance coming from major European indices. Indian benchmark indices could throw up some surprises provided the magic of year ending with the number 3 works. It did work in the past three instances i.e. 1983, 1993, 2003.
  Probaility analysis indicates that healthcare, metals, auto, and oil gas sectors stand a good chance of delivering positive returns this quarter whereas real estate, banking, and capital goods could well be in the bottom quartile of the performance scale. Among Nifty 50 stocks, we expect Tata Motors, Mahindra & Mahindra, Bharti, Jindal Steel & Power and Cipla to deliver positive returns  this quarter whereas DLF, UltraTech Cement, Maruti Suzuki, HDFC Bank and Infosys could disappoint.