Also, a recent US court decision to uphold the patent of Barr Laboratories for generic variant of the popular drug `Prozac' augurs well for domestic pharma companies as some of them have filed for patents of generic variants, KPMF said in its performance report for the month of August.

The prospects of large IT companies remain very good as many of them were moving up the value chain with high sophistication into high margin services. Apart from this, the quality of Indian software had resulted in client-referrals by Fortune 500 companies, which augured well for the industry, the report said.

However, rupee's weak showing was delaying any new allocations by FIIs in India as they were waiting for stability on the forex front.

The cautious note by RBI on economic growth in its annual report for 1999-2000 and the increase in oil prices do not augur well for the old economy stocks. Most of these companies continue to be ignored by market players despite their attractive valuations, the report said.

Currently, the market was in a consolidation phase as institutions were rebalancing their portfolios and this was a good time to further invest in a portfolio of quality stocks, it said.

On the Federal Reserve's decision last month not to hike interest rates in the US, the report said that no major rate hike was expected till the US presidential elections in November. FII inflows into India also turned positive in August, reversing the June/July negative trend, which would help improve the sentiment of rupee, it said.