Check out and buy stocks with good visibility of earnings

Consolidating at higher levels, the benchmark indices, the Sensex rose 345 points (0.8 per cent) to end at 41,945, while the Nifty added 96 points (0.8 per cent) to end at 12,352 on a weekly basis.

True to predictions, heightened activity was seen in the broader market on hopes and expectations. Outperforming the benchmark indices, the BSE small-cap index gained 4 per cent, and the BSE mid-cap index also rose 3.6 per cent.

It is pertinent to observe that more than 100 stocks from Midcap and Smallcap space have gained 10-60% in the last fortnight.

Signs of a conspicuous rally in the second rung stocks from various sectors largely signal that valuations of front-line quality stocks are at rich levels. Second-rung stocks are moving higher in a so-called valuation catch up the rally.

Many global investors for months had been preoccupied by the trade battle between the US and China, worried that tensions between the two countries would weigh on economic growth. The deal this week eased some of that anxiety.

With US stocks setting repeated highs this week and signs of the Chinese economy stabilising also fueled global investors' optimism.

For the week ahead, chartists predict trading range of 41,250-42,750 and 12,150-12,550 for the benchmark indices. Support for the indices evident at 41,600 & 41,250 and 12,250 & 12,150.

Follow-up buying support is necessary for further gains from hereon. Skeptics are wary that the eventual return of volatility could fuel unwinding of speculative positions and spark a market downturn.

FUTURES & OPTIONS

Derivative segment continued to witness brisk and volatile trading during the week ended. In the options segment, the highest open interest was seen at the 12,500-strike call option and 12,200-strike put option.

The Implied Volatility (IV) of calls closed at 13.56 per cent while that for put options closed at 14.10 per cent. The Nifty VIX for the week closed at 14.18 per cent and is expected to remain volatile.

PCR OI for the week closed at 1.41. Avoid fresh long positions if Nifty is trading below 12400 and BankNifty is trading below 32000 levels. Minor downward correction within a broader range (12450-12200) is likely in the next week.

Caution is the watchword. Markets may take a breather at current levels. Expect stock specific action on the back of ongoing result season. Action was seen in energy, healthcare, telecom and consumer durables while profit taking was seen in banks, metal, finance, public sector, and capital goods.

Long Buildup was seen in Torrent Pharma, Bharti Airtel, Dr Reddy's and Glenmark Pharma. Short Buildup was visible in Idea, SBI, Bharti Infratel and IOC. RIL reported highest ever quarterly net profit for the quarter ended December 31, 2019.

(The author is a stock market expert. He is former vice chairman of AP Planning Board)