Goldman Sachs, which was strategically overweight on India since March 2014, has turned slightly cautious towards Indian market in 2018 and lowered its investment view to marketweight from overweight earlier.
While bulls were in full control until last month, September is turning out to be a lackluster month. The Nifty50, which touched a record high last month, saw sharp selling pressure in this month taking the index below 11,300.
Escalating trade war fears, sharp drop in the Indian rupee, growing concerns of rising current account deficit due to jump in crude oil prices, selling by foreign institutional investors and risk of rate hike by central bankers are some of the factors that weighed on Indian markets.
Global investment banks such as Goldman Sachs and Morgan Stanley, which have come out with their reports on Indian market, suggest that premium valuation could be a concern and the upside from current levels remains fairly limited.
Global investment firm Morgan Stanley has raised its 30-share BSE Sensex target to 42,000 for September 2019 implying a potential upside of 11 percent, on the other hand, Goldman Sachs maintains a target of 12,000 on Nifty which translates into an upside of little over 5 percent.
Goldman Sachs, which was strategically overweight on India since March 2014, has turned slightly cautious towards Indian market in 2018 and lowered its investment view to marketweight from overweight earlier.
Sectorally, the global investment bank has upgraded defensive stocks and exporters. It is overweight on banks, tech and metals. The key downside risks remain a less stable government.
Morgan Stanley, on the other hand, said Indian equities continued to be in an uptrend and investors should bet on favourite underperformers.
"Investors should choose price underperformers with improving earnings outlook and finally broaden their portfolios by adding small and midcaps," it said.
On its Focus List, Morgan Stanley added SBI, Prestige Estates and Apollo Hospitals, and removed Infosys, Havells India and Zee Entertainment, given the recent downgrades.
We have collated a list of top 10 fundamentally strong stocks from various experts which investors can look at buying with a minimum holding period of 1-2 years:
Dr Reddy’s Laboratories:
The company has reported robust first quarter FY19 results, aided by the launch of gSuboxone. According to the management of the company, it has focus on operational efficiencies which helped in significantly improving its margin profile.
In FY19, its priorities are driving productivity improvement, focusing on core therapeutic areas and big brands, and scaling up New Chemical Entity (NCE) launches done through the Amgen deal.
In the medium to long term, management of the company wants to focus on ramping up biosimilars through internal and partnered assets and building differentiated products in relevant therapies accompanied by further ramping up of the base business.
The management expects 15-20 launches in FY19 and also expects emerging markets to grow 16% YoY led by a robust spurt in Russia and ROW.
Zee Entertainment Enterprises:
The company has led the industry in its evolution and transformation. Along the way, it has entered newer geographies, both domestically and globally, launched multiple channels, strengthened distribution, expanded the genres and widened its audience profile.
Moreover, management focus towards expansion and market share would give strong growth to the company in coming years. During the quarter, its consolidated advertising revenue grew by 18.6% to Rs 1,146 crore.
Domestic advertising revenue growth at 22.3% continued to be strong driven by demand across categories and partly aided by lower growth in the base quarter.
Bajaj Auto:
The company has a diversified business model and has a strong focus on the profitable growth, widening reach in export markets and strategic alliances with global majors.
The domestic 2-wheeler market would start growing from the festive season & would continue to grow for next couple of years. The management has assured that the company would see a very healthy top line growth and a very healthy EBITDA increase in coming quarters.
FY18-19 capex plan stands around Rs 250-300 crore. It would look to expand and strengthen the 150cc Pulsar segment in addition to pursuing new three-wheeler markets within India.
Its total current capacity is approximately about 6.6 million. 3-wheelers will be approximately about 7.2 lakh. The company expects 1.9 million export numbers for FY 19.
UPL:
The company has strong fundamentals and a robust outlook. Its strong focus on brand building and customer reach is helping the company in increasing its market share in major addressable markets.
Moreover, with the acquisition with Arysta LifeScience, the company will be one of the world's largest global crop protection companies, with an innovative and differentiated product portfolio.
The management has been focussing on technological enhancement and new product developments which would aid the further financial growth of the company. Moreover, the company believes new launches would bear fruit in the coming term.
Indian Hotels Company:
The Company plans to continue to grow through a judicious mixture of owned and leased hotels, a de-risked model along with its ability to attract management contracts.
Its command and long & successful track record in operating hotels for third party owners would facilitate growth for the future.
Moreover, it has the ability to deliver improved returns on capital would be driven through product renovation, rigorous asset management, revenue maximization, cost control and reduced leverage and exit from non-core underperforming assets.
It has assigned a capex of Rs 3,000 crore for the next five years and hotel industry occupancy levels and average room rate (ARR) are showing upward trends due to a demand-supply gap.
Mahanagar Gas:
Monopolistic nature of the business and ramp-up/expansion in new geographies would drive volume growth in the coming years. Better economics of CNG/PNG versus liquid fuels in an era of a buoyant crude price regime and maintained spreads are tailwinds for the company.
Axis Bank:
Axis Bank has made significant investments to ride the next growth cycle (post-near-term asset quality challenges), with strong capitalisation and an expanding liability franchise.
The worst seems to have been priced in, and the bank is available at attractive valuations as compared to other similarly-placed peers. The new CEO could bring in a fresh perspective to the bank’s growth plans.
Rico Auto:
Post its split with FCC in 2015 Rico Auto has changed its strategy and now caters to PV and CV markets in addition to 2W. Strong order book of Rs 4800cr, capacity expansion and increasing volumes in alloy wheels, changing product mix are expected to improve the OPM.
Rico is in the process of launching 3 more products and improving profitability may help it get re-rated to a PE comparable with other auto-ancillary companies.
Engineers India:
EIL is likely to benefit from the expected capex in the hydrocarbon and petrochemicals industry as it is a market leader for consultancy. It’s a debt-free company with an order backlog of Rs 7229cr (~3.5x book-to-bill). With a healthy cash balance of Rs 2500cr, it may reward shareholders through another buyback or special dividend.
Sun Pharma:
Sun Pharma is amongst the few companies in India to have made large upfront investments in US specialty. OPM are expected to improve on the back of key drugs launch and moderating price erosion in the US.
The company has 422 approved products in USA and 139 pending for approval. Ramp up of generics and specialty business driven by increased investments augurs well for the company as it improves the launch visibility.
MORE WILL UPDATE SOON!!
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