India may not be the largest economy, but is a shining star among the emerging as well as developed markets across the world, say experts. If investors have to create serious wealth, this is the time to start accumulating quality stocks, they say.
When the market falls, all good stocks will correct too. But eventually we will realise that domestic stocks are different. In 20 years, Infosys has surged 6,000 times, while the market is up only five times,” said Raamdeo Agrawal, Joint MD, Motilal Oswal Financial Services.
I believe India will move far ahead of most other markets around the world. The downside looks limited for the broader market and if an investor enters the market now, a significant upside is likely on a five-year basis,” he said.
The domestic economy is on the cusp of a turnaround. The government is aiming to speed up economic growth to hit the double-digit mark quickly. The economic growth booster will aid corporate earnings growth, kickstart the investment cycle and lead to an increase in credit offtake.
There is always a possibility that the benchmark indices may remain rangebound, but individual stocks hold the potential. Investors looking to create wealth should look at quality stocks at every dip.
The equity market is forward looking and reacts in advance, and all the above factors are fresh triggers for the next legup in the domestic market even though global markets may not provide many cues.
I would say global concerns are there, except for the US, which is fairly firmly on the recovery path. But Japan, pockets of Europe and China are concerns and you saw IMF downgrading a lot of growth targets for the emerging economies,” said Sunil Subramaniam, CEO, Sundaram Mutual Funds.
It is a mixed bag globally and from the Indian market’s perspective, it is not too bad a deal. Because, we will be the shining star in the world in terms of growth over the next three to five years. Even though the pool of money is going to get reduced, we will see a decent share of it coming to us from the emerging market pool,” he said.
There is no doubt that the world is slowing down compared with where it used to be. China is no more the engine of growth for the world and India might be there in the next few years, as there is increasing evidence of that, say experts.
The structural shift in favour of India is driven by two very large things that have been around for a while — one is that commodities are weaker, and two the new government has a decidedly right of centre orientation,” Dipen Sheth, head of institutional research, HDFC Securities, said in an interview with ET Now.
Domestic savings are moving into equities. Globally, the Fed is moving away from rate hikes. I think money is going to flow into India,” he added.
Looking at the macros, India has its fiscal deficit and current account under control. Growth is picking up, the investment potential is high, inflation is falling and rupee is stable, say experts.
India is one of the few countries where interest rates can be brought down even after half per cent cut. On a top-down basis, India looks like an oasis in a barren desert,” says Nilesh Shah, MD, Kotak Mahindra AMC.
India stands at the cusp of growth. And retail investors must not let this unique opportunity go by. Again! Indians have been selling equities since 1994 and FIIs have been mopping them up,” he said.
Shah is of the view that over the next five years, mutual funds will probably bring in around Rs 3,50,000 crore. Add this to around Rs 2,50,000 crore that can come from LIC, Rs 1,00,000 crore of private insurance and Rs 2,00,000 crore of PF trusts. “Where will the supply come from? Doesn’t that show a big wealth-creation opportunity?” asks Shah.
We have collated a list of 10 stocks that investors can look to buy on dips for a minimum investment horizon of 12 months:
Analyst: Dipen Sheth, Head of Institutional Research, HDFC Securities
Bharti Infratel Ltd: Bharti Infratel is a different story by itself and we love it. The big thing here is that if you can see headline interest rates coming down a 100-150 bps between now and not the next six months, but in the next two years, then these are amazing stocks to buy.
This is because the price/book multiple that you will assign will be higher than the two year out multiple will be another 20-30 per cent higher and you will have a double play, the double whammy might well give you 15-20 per cent CAGR on this stock.
Analyst: Ashish Maheshwari, Director, Blue Ocean Strategic Advisors
Kwality Ltd: This is India’s number three private sector dairy processor after Nestle and Britannia and here the triggers are that this particularly company is already processing 3 million litres of milk per day and got six processing plants already functioning.
Recently, the company went for one expansion which is going to be operational this quarter. After this, it is going to make butter, cheese, ghee and flavoured milk from these plants and they are also going to expand the dairy brand in the north Indian market.
I am expecting almost Rs 1,000 crore-plus topline. Once this plant is commissioned, from there they are going to cater mainly to the retail side of the market where the Ebitda margins are pretty high.
Analyst: Amisha Vora, Joint MD, Prabhudas Lilladher
Tata Motors, Glenmark, Federal Bank:
Among the largecap stocks, we like Tata Motors, even though we believe that the September quarter results may not be that great. Ebitda for the quarter may remain under pressure, but we believe in case of the JLR numbers, the bottom is already in place. Even as the stock has run up a lot this month, we believe it is a strong buy on every correction.
In addition, we would like to be in the pharma space, where we like Glenmark Pharma. We think over the next two years, the kind of cash generation that the drugmaker will see because of the growth will be very strong. The beginning is yet to be made, but its ANDA pipeline is very strong.
And the third from within the midcap basket, we have been bullish on is Federal Bank. We think the time has probably come when asset quality issues have kind of stabilised and we think Federal Bank looks extremely good.
Analyst: Girish Pai, HoR, Nirmal Bang Institutional Equities
Hero MotoCorp, HDFC Bank, ICICI Bank
We have positive views on private sector banks, especially HDFC Bank, ICICI Bank and Axis Bank. Among the PSBs, we like SBI. In the auto space, we like Hero Honda. Maruti is something we did like at lower levels. But given the runup we have seen on the counter, we believe there is not much of an upside left on this particular counter. We cover more of midcap consumer names than largecap ones.
As a house, we are focused more on midcap ideas and we have given selective buy calls on select consumer-oriented and capital goods stocks. Broadly, those are the areas we are working on.
From a largecap perspective, private banks are the ones we have been kind of pushing with clients. The auto space is very narrow, with only Hero MotoCorp being the stock that we really like from a buying perspective.
Analyst: Kunj Bansal, ED & CIO, Centrum Wealth
Sanghvi Movers, IFB Industries
These two stocks stayed investment propositions because the market has corrected significantly and valuations have seen resetting. At peak, Sanghvi Movers used to rule at around Rs 400. But the stock is currently trading at around Rs 300-310 levels, down around 25 per cent.
The company is a clear case of turnaround. In fact, its June quarter numbers saw almost 90 per cent rise in top line growth. The Ebitda growth was 2.5 times higher than top line growth. The trend is likely to improve.
As I said, that is a turnaround case and over next one or one-and-a-half years, we expect the return ratios and ROE for the company going back to around 15 per cent. To that extent, it is a business which is again coming back.
IFB Industry is a company from a different space. We have seen sudden loss of interest by investors in consumer durables over the last quarter or maybe four-five months or so.
The fact that Diwali sales will be recorded in the December quarter and not in the September quarter this year will be important. The fact that the company has set up new capacity for top-loading washing machines – which has already gone on stream and the sales have started – all these put together will result in good growth for the company going forward.
Source: Economic Times