With the Nifty crossing the 12,000 mark and the Sensex crossing the 40,000 mark, the next few days will be critical to watch if these levels are sustained. There is the monetary policy coming up on 06th June and the all important Budget on July 05th. One can get a much better picture of stocks after these two events. However, broadly you can assume that the credit policy will cut rates and the budget will reform friendly. Base on the assumption, you can design an investment approach like this.

· Consumption will be to sector to focus on. The government is planning a big push to tax reliefs, improving farm incomes, improving the financial strength of MSMEs etc. All these are likely to translate into consumption in the coming quarters. You should ideally prefer companies in the food and consumer staples business. Stocks like Britannia and Havells would be obvious choices.

· The next story to play for is the turnaround games like the PSU banks and the stressed NBFCs. The government is already committed to adequately capitalizing the PSU banks and also providing liquidity support to the NBFCs. That means, the stronger among the PSU banks and the more sound NBFCs have a very good chance of outperforming in the coming quarters. You can focus on stocks like SBI, Bank of Baroda, Bajaj Finance, Muthoot Finance etc.

· It may sound a little distant at this point of time, but also keep an eye on unique export stories. The government badly needs to push exports of goods and services to improve the current account deficit situation. That is only possible through a big thrust to exports. Moves like giving a boost to steel exports, textiles and even IT could be game changers for these export driven sectors. They could be the surprise package.

· Keep an eye on defence. In the last term, the government could not push defence in-sourcing in a big way but the situation is a lot more stable today. With a five year track record, the government is in a much better position to attract foreign investments into the Indian defence sector and open up greater opportunities for Indian defence companies. Bharat Electronics, Walchandnagar Industries, Bharat Forge may be among the beneficiaries of this move. You can focus on any of these stocks.

· Finally, what should you do with auto stocks? By itself it is a very diverse field and there is not much that you can really do with a macro approach. For example, two wheelers with a strong export franchise will be a beneficiary. Secondly, entry level cars have been in the dumps and that could see a turnaround. One can look at stocks like Bajaj Auto and Eicher but it is essential to be stock specific in this space.