Buy policy-sensitive stocks; Finolex Cables, Torrent Power top midcap picks

By Ashwani Gujral, Fund Manager, ashwanigujral.com

The Nifty fell 1.4% in the week, finding support at 5,980. The Bank Nifty depreciated 0.93% as lenders recovered a bit on comments made by the Reserve Bank of India governor.

Thursday’s action on the Nifty was not convincing as it failed to build on morning gains and closed near the lows of the day. The higher probability from here is that the Nifty may attempt a rally that could fail before the recent highs of 6,342 and restart a downtrend. The US Fed’s QE programme, maintained for now, may not take the markets substantially higher. It’s time to be cautious as all kinds of poll surveys are going to drive market volatility.

Again on macros, the current account deficit remains under control and, hence, the rupee remains more or less stable as long as tapering is off the table. However, the index of industrial production remains anaemic while inflation is high. The investment cycle is as good as over. Perhaps we are not going down but we are not improving on the domestic economy either. The positive aspect is the speed of action and clearly visible cohesion of policy between RBI and the government.

On micros, individual stocks are winning clearly and choosing those making all-time highs is the way to go. In terms of an election play, all kinds of policy-sensitives can be bought as a part of portfolio. In case a strong government is voted in, these stocks will go up several times just on that basis. Meanwhile, core positions on defensives must be held as uncertainties abound in the world.

Some midcaps that can be looked at are Finolex Cables, Torrent Power, BF Utilities, AIA Engineering and InfoTech Enterprises. Key weekly levels for the Nifty, Bank Nifty and CNXIT are 6,056, 1,0721 and 8,934 points, respectively.