At present the challenges for stock markets are high interest rates and increasing inflation. The increase in interest rates in India is higher, when considered on a basis points level. An article in Dalal Street investment journal Jun 06-19 issue discusses these aspects. In India, the results in the market have been as per expectations, but on the lower side. This has been due to increasing inflation and increased prices of commodities. They may continue to put pressures, leading to continued volatility. With inflation not coming down, interest rates may go up further. Pharmaceuticals and FMCG (food related) sectors are likely to have better prospects. Factors like normal monsoon and political stability are still important. With good monsoon food prices may come down, but the inflation may be on higher side. Also with increases in fuels, inflation will be higher still. In markets in USA, there may be gradual improvement and recovery say in one year. But Europe and Japan will still be full of concern. In India besides Pharmaceuticals and FMCG, I.T. will give better results. The economy should stabilize. Then we can increase our allocation to infrastructure and banking. At present, the investors should keep funds in well researched stocks and not go in for trading on tips, follow the macro economic developments and be invested on a longer term.