Stay cautious; Buy only good stocks

Markets ended in the red for the second successive second due to negative global cues, renewed fears about capital outflows, weak trend in crude oil prices and caution over outcome of assembly elections in some key states.

Benchmark indices the Sensex and the Nifty ended 379 points and 117 points lower at 25,228 and 7,733 respectively. Despite the controversy over the Augusta deal, the likelihood of the Insolvency and Bankruptcy Code becoming reality is heartening. The bankruptcy law has the potential to be a game changer for the distressed debt sector.

Volatile markets have begun to temper the excitement in the IPO market. Nervousness in markets will continue till the onset and progress of monsoon, say market observers. The near term direction of markets will be dictated by the macroeconomic data (CPI, IIP and trade deficit numbers), FII activity, crude oil prices and movement of rupee. Track Eurozone GDP, US unemployment data and Chinese economic data for impact on global markets.

For the week ahead, chartists predict trading range of 24,600-25,700 and 7,565-7,900 for the indices. Key supports for the indices are at 25,000 and 24,650 and 7,660 and 7,570. Sector rotation and stock specific moves will continue in near term.

Technically, markets may consolidate in near term with negative bias. Stay cautious on the market and buy only quality stocks with good earnings visibility in a staggered manner from medium to long term perspective.

The stock market is filled with individuals who know the price of everything, but the value of nothing. Do the necessary research, study and analysis before making any investment decisions.

F&0 On the back of renewed selling from FIIs, the derivative segment witnessed selling on every bounce during the week ended. Fresh shorting was seen in sectors like banks and metals. In the option segment concentration of puts at 7700 and 7500 strikes suggest further weakness in near term. Sentiment indicators like put/call ratio, implied volatility and VIX suggest further vola-tility from current levels. Led by metals, banks and IT, nearly all the sectors ended in the red.

Selective counters from realty and pharma, however, witnessed good buying interest. The passage of the Real Estate Regulator Bill is positive for industry, say observ-ers. Strong FDI expected into the sector. Stay invested for present.

Capital Goods stocks are back on the shopping lists of fund managers. Buy on declines BHEL, Voltas and Crompton.

Profit booking was seen in metals and IT. Use bounces to initiate short term selling.

Mild buying was seen in Power stocks. Further gains are likely in CESC and Tata Power.

Stocks looking good are Apollo Hospitals, Asian Paints, GAIL, HDFC, Havells, India Bulls Real Estate, Jain Irrigation, Karnataka Bank, Maruti and Voltas.

Industry Trends: Correction in base metals such as copper, aluminium and zinc has been attributed to concerns over weak demand from China. Short-term bounce indicated on the back of rumours of another round of stimulus package in China. Bounce in dollar may see hi gold and silver. Aksh-aya Tritiya may give fillip to shares of jewellers. After the recent round of profit booking, oil may witness small upmove.

Stock Scan Pennar Engineered Building Systems Limited is one of the leading custom designed building systems solutions provider in India. It is one of the few companies that offer leak-proof roofing systems in India. It is a preferred partner by key customers like Ultratech, L&T, Volvo, etc. It is trading below the issue price and is good buy for medium term target of Rs 275.

Bharat Bijlee operates as an electrical engineering company in India. It operates in two segments, power systems and industrial systems. It undertakes EPC electrical projects for customers in cement, power plant, steel, paper, textiles and fibers, PSUs. Buy on declines for a target price of Rs 1,650 in medium term.

Hikal Ltd is a manufacturer of fine chemicals for pharma and agrochem companies in India. It collaborates with companies and offer solutions in contract resear-ch, custom synthesis, and custom manufacturing. Buy the company’s stock for the medium term target price of Rs 275.