"Expect more bad news in the first half of the year and good news in the latter half as the present volatility of the market would persist for the time being," said Sanjay Sinha, chief investment officer, SBI [Get Quote] Funds Management Pvt Ltd.

Sensex has been battered down by 3,165.40 points, or 15.23 per cent, from 20,783 on January 8, 2008 to 17,617 on Thursday.

Similarly the the Bombay Stock Exchange mid- and small-caps also declined by 28 and 31 per cent respectively.

 About 10 stocks contributed to the 64 per cent fall in the benchmark BSE Sensex. Volatility during the period was around 44 per cent in Sensex whereas for the BSE Mid Cap and BSE Small Cap it was 58 per cent and 50 per cent, respectively.

"One needs to understand that the financial markets are interlinked. But with interest rates already at their peaks, I must say the market would definitely move in the second half of the year," said Sinha while talking to Business Standard.

"The valuations are perfect. It is the right time to enter the market and for the coming financial year, the mid-caps are likely to do better than the large caps," he added.

The CIO said that sectors such as engineering and capital goods, banking and financials, real estate, construction and passenger cars are likely to outperform the market.

Meanwhile, R K Gupta, managing director of Taurus Asset Management Co Ltd, said it is a "normal market phenomenon".

"It's a normal profit booking exercise at a higher level by the FIIs as the value of rupee has appreciated substantially in the last one year," he said.