The Nifty, which seemed to be persistently buoyed by FII flows, finally saw the tide drop. The results of top index majors were hardly confidence-inspiring. Growth expectations are getting ready for a reset. Indices seem unclear on how to price in growth for the rest of the year. The first quarter numbers clearly indicate the need to rein in expectations, cut down on estimates and lower guidance. The only thing that is still unclear is how the FIIs will reprice their pending buy decisions and reset their expectations. Once that becomes clearer, the market trend will show the required clarity.

The greater worry is the overgrown optimism about smaller companies. The markets have been more than liberal giving them better valuations than industry leaders. The rest of the results season will be very interesting to study how the market resets valuations in smaller companies. Right now, the froth is still running tall in smaller companies compared to the index heavyweights.

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