Indian equities gained more than six per cent in July to reach record levels, but going forward, Nifty is expected to consolidate, though a sharp fall is unlikely thanks to recovering earnings trajectory, says a Credit Suisse report. According to the Credit Suisse report, the Nifty may consolidate and the gap between the winners and losers is likely to narrow going forward. "We remain cautious on Indian equities due to their stretched valuations. However, we believe a sharp fall in equities should be arrested given positive equity inflows and recovering earnings trajectory," Credit Suisse said in the note. Indian equities gained more than six per cent in July to reach record levels, making the Indian equity market one of the best-performing markets globally. A combination of factors including solid first-quarter earnings, fall in oil prices and further cuts in goods and services tax (GST) rates for about 88 items lifted investor sentiments. "We recommend to be cautious and very selective in stock-picking with clear preference for defensive names. A small outperformance from mid-caps is possible, but we recommend to trim exposure and reduce risks in portfolios," the report said. Overall, 29 out of 50 Nifty companies have reported their June quarter results so far with total reported PAT growth of around 10 per cent year-on-year. Though results from banks and financials were tad weaker as the higher interest rates and competition have started to hurt margins and treasury income, the outlook is improving for retail lenders amid improving credit growth. "Hence, we continue to maintain our positive outlook on consumption-oriented companies including discretionary, autos and retail lenders. We also like companies linked to construction materials and cement given rural demand pickup," the report said.