introduction of ltcg tax may have unnerved investors but equity as an asset class still offers the best inflation adjusted returns even after tax rakesh tarway head of research reliance securities tells et wealthdo you see the current market sentiment as a phase of consolidation or is more correction on the cardsmarket sentiments are a little bearish due to factors like rise in global and domestic yields the new ltcg tax and news of the pnb scam widening of trade deficit is also not helping the equity market nonetheless we believe the market has already witnessed some value correction and there is likelihood of time correction because domestic retail flows are still very strongis the earnings growth in december quarter along expected lines are more sectors showing signs of recoveryconsidering the bloomberg consensus for the third quarter of 201718 reported earnings by nifty companies expsus was a miss by 6 however there has been a clear sign of earnings rebound as reported earnings recorded a growth of around 19 year on year for nifty ex psus fmcg construction metals and autos have reported strong earnings uptick whereas cement banks pharma and technology reported mixed performance while earnings growth in the third quarter was mainly on account of base effects market participants would be keen to see how earnings pan out in the fourth quarter based on our channel checks and management commentaries of most of the companies it appears earnings momentum will sustain and we expect earnings growth in the midteens in the ensuing quarters growth in order book reported by infrastructure companies including lt ncc etc has been encouraging similarly increase in rural sales volume in fmcg space and uptick in bank credit growth are positive signs of economic recovery and sustained earnings growth how will the ltcg tax impact equity markets over the long termimposition of ltcg is undoubtedly a negative event for equity markets but for investors who would like to treat equity as an asset class it still offers the best inflationadjusted posttax returns therefore over a period of time this tax incidence will be taken in the stride and normal life will continue as far as investment in equities is concernedhow soon do you expect interest rates to start climbing upwardsinterest rate uptrend can be triggered in two ways by a surge of consumer inflation beyond rbis comfort or througha significant reduction in the spread between real interest rate of india and us looking at the january cpi of 507 along with softening of crude and vegetable prices we do not expect any reversal of interest rates in the near term the spread between domestic and us real interest rates is unlikely to go below 100 bps in the medium termwhat are the themes or sectors that interest you at this juncturethere is a clear thrust towards rural and infrastructure development in the country we think these two themes should be the best play for investors pickup in rural economy will have cascading impacts of