If you have a corpus of Rs 10 lakh at 35, this is where you should invest to achieve your millionaire dream

The valuations have come off from the recent highs which makes largecaps a preferred play, and midcaps after witnessing correction are still trading at a valuations higher than largecaps so we do not rule out further correction in this space.

  

Talking about personal finance, he said that an investor in late thirties should allocate at least 70-75 percent of his portfolio into equities/MFs if investing for long run. 

Our preference would be for companies focused on infrastructure spending (Road, railways, defense), e-way bill implementation (Logistics, Auto, Building material etc.), consumption revival & Financialisation of savings (to benefit insurance companies, mutual funds, and broking firms).

We also see a lot of traction in sectors linked to rural consumption as the government is focused on increasing the incomes of rural people. Agro chemical stocks can do very well in 2018.

Metal stocks can also do well in 2018 on the back of stricter emission norms in China and Indian government’s anti-dumping stance.

It is better to avoid PSU banks as the amount of provisioning on NPAs is not clear. Giving a choice, within the PSU banking space, we would prefer SBI as it has already gone to 50-55 percent provisioning and is better in terms of capital adequacy.

Indo Count Industries:

Among the home textile companies which are mainly exporters of bed linen and terry towels like Indo Count should do well in the next 2-3 years as the destocking by large retailers in the US is coming to an end and as they start restocking growth should come back. Indo Count is trading at 10x FY19E for a 10 percent RoE profile.

Cochin Shipyard:

Cochin Shipyard has been performing poorly because of the physiological linkage to the shipping industry. It does a large amount of shipbuilding work for the Navy and Coast Guard.

The order book is healthy providing visibility for next 4 years. If one removes the cash and other income then operational RoE goes to 25 percent compared to 11 percent reported in FY18E.

UPL:

Agrochemical stocks which have corrected a lot are also contra buys. We like UPL Ltd. in this space as it is the largest player in the industry and its earnings this year is expected to be nearly 5x higher than its second largest peer, PI Industries.

The sector has companies which have a RoE profile of 20 percent and trades at ~20x one Forward PE basis. UPL for a 24 percent RoE profile and trades at 15x on Fw PE basis.

DB Corp:

DB Corp could be a good contra play in the media space. People have a very negative sentiment towards print media companies.

The worst seems to be behind in FY18 and numbers should improve from FY19E onwards. Due to the favourable election cycle, the print advertisement should pick up in FY19. For more than 25 percent EBITDA margin, more than 20 percent RoE and a dividend yield of over 3 percent the stock trades cheap at around 13x FY19E.

Tata Motors:

Tata Motors could be a good contra play in the automobile space. Past few quarters have disappointed investors due to volatile margins and forex hedging losses. Going forward as Hedging losses unwind we expect JLR EBITDA margins to improve.

Based on the anticipated improvement in EBITDA margins and earnings the stocks look cheap. There could be a positive surprise from Indian operations, mainly CV business.

State Bank of India:

The SBI stock has corrected 21 percent from its recent high. However, the stock can be a good contrarian play as lower slippages in FY2019E over FY2018E, improving loan growth and resolutions of IBC accounts are expected to improve margins in the near term.

CASA growth has remained strong in recent quarters led by strong growth in savings accounts and this will provide some relief to incremental borrowings cost.

 We see USD-INR trading within a range of 64.30 to 65.50 for the next 6 months. A major factor for Rupee’s depreciation since early February is the stress in the trade finance market, where post-PNB scam, rolling over existing LOUs have become an issue.

Due to which demand for dollars in the spot has risen. However, we believe, the disruption will be temporary, till the time Banks conduct a quality check of their existing LOUs (Letter of Undertaking) issued.

Once the situation normalise, rupee can see some amount of appreciation. The global trend of USD would remain downward as strong global growth would continue to drive fund flow away from safe assets towards risky assets like from USD and US Treasuries towards EM equities, commodities and EM currencies.

As a result, we do not anticipate large depreciation of Rupee. If rupee depreciates, the export-oriented sectors like Infotech and Pharma would be the key beneficiaries of any depreciation in the rupee.

Export-oriented companies in the textile and engineering could also turn out to be major beneficiaries. Infosys, Tech Mahindra, and Cipla are some of the stocks which look good at this point in time.

MORE WILL UPDATE SOON!!

Earnings, Karnataka polls to chart market trend; 5 stocks with up to 30% return potential

We expect healthy 15-18 percent earnings growth and bullish on large-caps over the midcaps.

  

We believe recovery track would be backed by better-than-expected corporate earnings FY18 and pro-BJP outcome in Karnataka elections which will shape up the second half performance of the markets.

Domestically we expect healthy recovery in corporate earnings, Pro BJP State elections outcomes followed by Timely, well spread and sufficient monsoon would keep market on optimistic outlook while globally US Trade war saga, Oil prices and raise in FED interest rates scenario can break the markets sentiments on either side. Hence any unpredictable changes in these parameters will trigger market movements going ahead.

Considering the current scenario obviously we prefer to weight (50 percent) on Equity mainly on high quality frontline counters which are fundamentally strong, complying high corporate governance and has health earning visibility. We see many such quality companies have come at very reasonable prices for multiple reason. Accumulating those would be once chance which may not be available in next recovering bull markets.

We believe Mutual fund exposure as a second best to be investing mainly in the sector focused schemes like Pharma / Banks or diversified scheme with 25 percent weight which are best in the downturn scenario.

With respect to bond yields which are currently yielding better as the expected pickup in economic activity and demand for credit will also affect the cost of money in the economy. Therefore we see that the increase in bond yields is unlikely to be reversed significantly in the foreseeable future while the overall economic outlook is positive.

We expect healthy 15-18 percent earnings growth and bullish on large-caps over the midcaps.

Below are the Top five sectors we are optimistic in coming 2-3 years.

1. Capital Goods

2. Autos

3. I.T

4. Financial Services

KEC International | Rating - Accumulate | CMP - Rs 393 | Target - Rs 500 | Return – 27%

KEC International (KEC), the flagship company of the RPG group, is a leading EPC player in T&D Space. KEC has over 7 decades of experience with footprint presence in 63 countries and strong execution capabilities across all the segments. We expect T&D business regains momentum by expanding beyond boundaries and Strong order inflows improving revenue visibility. Energy & Rail– Priorities of the New Government sector in focus: The Govt proposed 100 percent rural electrification by 1st May 2018 which act optimistic for the company’s T&D business and also proposed 3500km of railway lines to be commissioned in FY18 which is good for KEC as it is focusing more on Railway business.

Maruti Suzuki | Rating - Accumulate | CMP - Rs 8,715 | Target - Rs 11,330 | Return – 30%

Maruti has historically built strong brands and that has resulted to maintain the lion's share of small car and support healthy volume growth. New launch like New Swift Brezza, Baleno and IGNIS have performed better than market expectations. Eyes toward electric vehicles: Company plans to introduce EVs as soon as market sets to swift from traditional vehicles to EV segments. It is focusing on hybrid technology, which is a step toward electric mobility. Li-ion battery plant, which is being set-up by JV between Suzuki, Toshiba and Denso, would help to reduce cost of hybrids and EVs. MSIL has plans to expand its Nexa network for the premium segment to 400 outlets by 2020 from 200 currently. We are positive on the space on long term

Bajaj Finance | Rating - Accumulate | CMP - Rs 1,669 | Target - Rs 2,170 | Return – 30%

Bajaj Finance (BFL) has continued to maintain its strong growth momentum with a 35 percent yoy growth in consolidated AUM at INR 779 bn, largley led by consumer and commercial financing. Asset quality during the years was steady. Despite providing in excess of RBI requirements, the company has managed its credit costs well. Segment wise, the company continues to be cautious on SME financing as it continues to witness some pressures in the self-employed mortgages (LAP & SEHL). At currently level asset quality is one the best in the industry along with a comfortable coverage ratio, despite maintaining a growth rate more than 30 percent. We continue to be positive in this space for 2-3 years for healthy returns.

HDFC Life | Rating - Accumulate | CMP - Rs 430 | Target - Rs 560 | Return – 30%

We believe HDFC Life has Unique Positioning in Life Insurance Space with strong parentage and a trusted brand that enhances its appeal to consumers. Consistent revenue growth: Between FY15 and FY17, annualised premium equivalent posted a CAGR of 14.5 percent. The company has a healthy balance sheet with total net worth of Rs44.6bn and solvency ratio of 200.5 percent as of 30 September 2017, above the minimum 150 percent solvency ratio required under the Insurance and Regulatory Development Authority of India or IRDA regulations.

Godrej properties | Rating - Accumulate | CMP - Rs 738 | Target - Rs 950 | Return – 29%

Godrej name is next to quality in this industry. It has different land bank strategy like JV with land owners that reduces its land cost and also ties up with developers as a Development manager which helps it earn 10-11 percent of revenue for branding, marketing and selling of the project. We believe new project pipeline continued to scale up in operation. Godrej have completed the RERA registration of all their projects in Maharashtra, Karnataka, Chennai, Ahmedabad and NCR. Post implementation of RERA, opportunities for new project acquisitions are expected to increase, especially for organised developers. The combination of GST, the Real Estate Regulatory Act, an improving economic environment, lower inflation, and lower interest rates has led to much better affordability and are expected to revive housing demand.

MORE WILL UPDATE SOON!!

Scouting for value stocks? Top 12 contra buys in volatile market

After the recent correction, valuations of Indian market have come down to a reasonable level which should give motivation to investors to accumulate quality stocks on declines.

   

After a blockbuster 2017, profit booking and relentless selling by foreign institutional investors (FIIs) pulled the S&P BSE Sensex lower by 6 percent so far in the year 2018 as of closing price of on March 12.

There are plenty of domestic and global factors which pulled the index lower but the good news is that the bull run is intact and investors who are in the market for long innings have nothing to fear.

Investors should look at companies across market caps which have a sustainable business model and can deliver high-quality growth. Smallcaps are still a better bet than Sensex or Nifty.

After speaking to the management of many companies in the last 1 month in which we have exposure suggest that FY19 numbers for most of the companies suggest earnings growth of 30-50 percent or even 150 percent which makes valuations not very demanding,” he suggests.

After the recent correction, valuations of Indian market have come down to a reasonable level which should give motivation to investors to accumulate quality stocks on declines. Investors should focus on stocks which have either corrected a lot or have huge growth potential.

Here is a list of top 13 stocks compiled from different experts which are contra buys at current levels:

Indo Count

The home textile companies which are mainly exporters of bed linen and terry towels like Indo Count should do well in the next 2-3 years as the destocking by large retailers in the US is coming to an end and as they start restocking growth should come back. Indo Count is trading at 10x FY19E for a 10 percent RoE profile.

Cochin Shipyard

Cochin Shipyard has been performing poorly because of the physiological linkage to the shipping industry. It does a large amount of ship building work for the Navy and Coast Guard.

The order book is healthy providing visibility for next 4 years. If one removes the cash and other income then operational RoE goes to 25 percent compared to 11 percent reported in FY18E.

UPL

Agrochemical stocks which have corrected a lot are also contra buys. We like UPL Ltd. in this space as it is the largest player in the industry and its earnings this year is expected to be nearly 5x higher than its second largest peer, PI Industries.

The sector has companies which have a RoE profile of 20 percent and trades at ~20x one Forward PE basis. UPL for a 24 percent RoE profile and trades at 15x on Fw PE basis.

DB Corp

DB Corp could be a good contra play in the media space. People have a very negative sentiment towards print media companies.

The worst seems to be behind in FY18 and numbers should improve from FY19E onwards. Due to the favourable election cycle, the print advertisement should pick up in FY19. For more than 25 percent EBITDA margin, more than 20 percent RoE and a dividend yield of over 3 percent the stock trades cheap at around 13x FY19E.

Tata Motors

Tata Motors could be a good contra play in the automobile space. Past few quarters have disappointed investors due to volatile margins and forex hedging losses. Going forward as Hedging losses unwind we expect JLR EBITDA margins to improve.

Based on the anticipated improvement in EBITDA margins and earnings the stocks look cheap. There could be a positive surprise from Indian operations, mainly CV business.

State Bank of India

The SBI stock has corrected 21 percent from its recent high. However, the stock can be a good contrarian play as lower slippages in FY2019E over FY2018E, improving loan growth and resolutions of IBC accounts are expected to improve margins in the near term.

CASA growth has remained strong in recent quarters led by strong growth in savings accounts and this will provide some relief to incremental borrowings cost.

Analyst: Vinod Nair, Head of Research at Geojit Financial Services

HCL Technologies

The stock underperformed the benchmark Nifty index in the last 1 year, up to a little over 13 percent. Geojit continues to remain positive on HCL on a consolidated basis driven by traction in deal wins and strength in Mode 2 & 3 services (focus on next-gen offerings).

Revenue contribution from Mode 2 & 3 services surpassed 25 percent of the total revenue and the management is eyeing to further increase the contribution from digital business to 40 percent over the next few years.

Deal wins remained strong in Q3FY18 with the company signing twenty transformational deals across services. The company’s strategy of augmenting its IP based partnerships with technology vendors to broaden its product offerings is expected to provide a tailwind to revenue growth going ahead. We factor revenue CAGR of 9 percent over FY17-20E.

Aarti Industries

After rallying a little over 50 percent in the last one year, the stock has undergone some bit of consolidation so far in the year 2018. It rose a little over 2 percent in the same period.

AARTI Industries Ltd (ARTO) is a global leader in Benzene based derivative products. The company has a diversified product portfolio with end users in pharma, agrochemicals, specialty polymers, paints & pigments.

ARTO’s Q3 Revenue grew by 29 percent YoY, led by strong growth across business segments with Speciality chemical business grew by 23 percent YoY, home & personal care business 103 percent YoY and Pharma 35 percent YoY.

Recently, ARTO signed Rs10,000cr exclusive supply contract with a global chemical conglomerate for high-value speciality chemical intermediate over a period of 20 years with the commencement of supplies from the Year 2020.

Going forward, we believe that with strong off-take Pharma segment and stable growth from Specality chemicals segments, we factor revenue to grow 14 percent CAGR over FY18E- FY20E. Given healthy earnings outlook, we continue to have a positive rating on the stock.

Torrent Pharma

The stock is down nearly 6 percent so far in the year 2018 and on a 1-year basis, it slipped by nearly 1 percent. But, Geojit feels that there is tremendous potential in the business.

Torrent’s acquisition of branded formulations business of Unichem Laboratories will strengthen its presence in the domestic market with expansion in the chronic portfolio, improved market share and widen distribution networks.

Besides recovery in US business is expected to drive robust growth going ahead. Higher revenue growth from Europe is also another positive for the company. Given increased R&D spends for high margin/high-volume products and meaningful new launches for coming years.

Notably, the management has guided for 10-15 ANDA filings in FY18 and also indicated plans to submit 3-4 derma products by this fiscal end. We expect Torrent Pharma’s revenue and Adj. PAT to grow at a CAGR of 14 percent/9 percent over FY17-20E owing to increased contribution from the domestic, gradual pickup in US sales through quality filings and strong growth in Germany, Brazil and RoW.

Idea Cellular

Amid the ongoing troubles in the telecom sector, shares of Idea Cellular slipped a little over 27 percent so far in the year 2018 and on a 1-year basis it has fallen over 24 percent.

Idea’s focus on the Vodafone merger and accelerating synergistic benefits both in terms of operating cost and capex is expected to achieve a higher level of efficiency going ahead.

The merger process is likely to be completed by H1CY18, we expect synergies to start accruing from FY20E leading to an expansion in EBITDA margin to 28.4 percent in FY20E.

Importantly, the company’s fund-raising will provide Idea with much-needed liquidity to boost network and protect its revenue and market share. Moreover, Idea’s plan to monetise its tower assets will strengthen its balance sheet.

Tata Global Beverage

The stock has fallen over 14 percent so far in the year 2018 but it nearly doubled in the calendar year 2017. Geojit Financial Services feel that the stock is a good buy on declines.

Tata Global Beverages (TGB), an integrated natural beverage company derives ~70 percent of revenue from branded tea business and ~60 percent of the revenue comes from markets outside India.

TGB has put in place a new strategy to drive growth and profitability including exiting from loss-making geographies. Under the core business rejuvenation, TGB will expand its product offerings in premium and non-black categories and enhanced its focus on green and herbal tea categories (higher margins).

It is also planning to foray in large tea consuming Asian markets such as Singapore, Malaysia, and China. To renew Nourishco (JV), TGB launched several new products/variants under Tata Gluco Plus and Himalayan water brands.

We expect TGB to gain market share across geographies led by its innovative premium product offerings and expect revenue/PAT to grow at ~6 percent/23 percent CAGR over FY17-20E.

Bhansali Engineering Polymers

The stock witnessed profit booking so far in the year 2018 after it rallied over 600 percent in the last one year. Investors should look at adding positions on every fall.

The company currently has a capacity of Rs80,000 whereas the domestic demand is 350000 which is being catered by only two such companies in India.

By 2018 and 2022 company is planning for capacity expansion to 350000 which is nearly 4 times. And, the company will be self-sufficient in catering the overall domestic demand. Financials of the company are very lucrative. Accumulate on dips should be the strategy.

Firstsource Solutions

The stock has underperformed on a 1-year basis when compared to the benchmark index. It rose a little over 11 percent in the last one year. But, tracking the momentum in 2018, IT stocks are likely to pick up momentum.

FSL is into small cap IT – Software’s we have seen IT has been performing and likely to outperform. As per RRG IT sector is the only sector which is in the Trending quadrant.

The company has posted a net profit of Rs.99.55 crores for the period ended December 31, 2017, with reduction of debt and available at cheap valuations. FSL looks to be a turnaround and open for targets of more than 65 with long term horizon.

MORE WILL UPDATE SOON!!

Top 5 stocks which can give up to 20% return in short term based on technicals

Reversal of downtrend will be seen once Nifty starts to trade above 10,640 levels on a sustainable basis. On the downside, immediate support is seen at 10,360 and then at 10,300 levels.

  

The markets got off to a strong start to the week with Nifty logging in 1.9 percent gain to close at 10,421 levels on Monday. Positive cues from the US after better than expected jobs data boosted sentiment in global markets also helped the sentiment on D-Street.

For the day, the index has formed a long bullish candlestick pattern indicating sustained buying interest through the day. The Nifty respected the long-term 200-day moving average (DMA) and seen a bounce back from the average.

The index closed at a cluster of short-term resistance zone of 10,410-10,450 levels. Crossing and sustaining above this on tradable basis index is likely to rally towards 10,640 levels which is recent congestion zone high.

In the Nifty Call options, strike prices 10600 followed by 10,500 have highest open interest suggesting which is likely to act as resistance for the market.

Thus, reversal of downtrend will be seen once index starts to trade above 10,640 levels on a sustainable basis. On the downside, immediate support is seen at 10,360 and then at 10,300 levels.

While 10,155 becomes the key level to watch on the downside; breaking below this will see a resumption of downtrend and selling pressure to intensify.

Here is a list of top 5 stocks which can give up to 20 percent return in the short term:

Kotak Mahindra Bank Limited: CMP Rs 1101| Stop loss: Rs 1060| Target Rs 1200| Return 9%

The stock has been trading sideways for last five months between Rs 980 and Rs 1120 odd levels. Recently stock witnessed bounce back from the lower end of this range to touch high of Rs 1110 levels.

Since then the price has been sideways to negative in a small range to form bullish flag pattern on daily chart. After yesterday’s positive movement stock is showing is signs of breakout on the upside.

Despite fall in the market stock is trading just three percent off its all-time high indicating strength in the counter. Price has been forming higher lows indicating buying coming in at higher levels.

Stochastics has given positive crossover with its average suggesting change in short-term trend to the upside. Thus, the stock can be bought at current levels and on dips to Rs 1090 with a stop loss below Rs 1060 for a target of Rs 1200 levels.

KPIT Technologies Limited: CMP: Rs 218| Stop loss: Rs 205| Target: Rs 260| Return 19%

On the long-term monthly chart, the stock has formed a major W-shaped pattern between Rs 230 and Rs 190 odd levels and currently trading at the upper end of the pattern. The stock has been consolidating in a range of Rs 225 and Rs 190 odd levels for the last couple of months.

Thus, suggesting the stock is poised for a major breakout on the upside. Stochastics has given positive crossover with its average. MACD has given positive crossover with its average and moved above neutral level of zero suggesting the start of fresh up trend.

The 50-day moving average has offered support on declines and can be kept as a stop loss for long positions. Thus, the stock can be bought at current levels and on dips to Rs 213 with a stop loss below Rs 205 for a target of Rs 260 levels.

Network18 Media & Investments Limited: CMP: Rs 54| Stop loss: Rs 50| Target: Rs 65| Return 20%

The stock touched high of Rs 64 levels in January and then declined down to Rs 47 odd levels. For the last five weeks stock has been consolidating between Rs 47 to Rs 53 levels and formed the short-term base.

On Monday, the stock witnessed breakout from the base with strong price momentum and high volumes suggesting buying participation and reversal of downtrend in the stock.

Price has also given breakout from Bollinger bands with the expansion of bands suggesting price is likely to move in direction of the breakout. The stock has moved above long-term 200-day moving average which was acting as resistance for the stock and closed above it.

Thus, the stock can be bought at current level and on dips to Rs 53 with a stop loss below Rs 50 for target of Rs 65.

Jubilant Foodworks Limited: CMP: Rs 2084| Stop loss: Rs 2010| Target: Rs 2300| Return 10%

The stock has been in an uptrend since mid-2017 forming a higher top higher bottom on its daily chart. On January, the stock hit an all-time high of Rs 2331 and then corrected down to Rs 1950 levels.

The recent decline in the stock has been on low volumes suggesting market participants holding on to the counter. The stock has been holding above 50 days moving average which has acted as support in the past.

The recent correction has largely halted around a previous all-time high of Rs 1960 and the price has been consolidating above it in a narrow range for last one month.

Daily MACD has given positive crossover with its average and turned up from the neutral level of zero. Thus, the stock can be bought at current level and on dips to Rs 2060 with a stop loss below Rs 2010 for target Rs 2300 levels.

Voltas Limited: BUY| CMP: Rs 639| Stop loss: Rs 610| Target: Rs 730 | Return 14%

The stock touched high of Rs 675 on December 2017 and then witnessed decline down to Rs 555 levels. The fall corrected 61.8 percent Fibonacci retracement of the rally from Rs 495 to Rs 675 levels.

The price has formed a double bottom pattern on daily chart. For last three weeks, the stock has witnessed good volume action suggesting buying participation in the stock. The price has crossed and sustaining above 61.8 percent Fibonacci retracement of the fall from Rs 675 to Rs 552 levels.

Thus, the stock can be bought at current level and on dips to Rs 630 with a stop loss below Rs 610 for a target of Rs 730.

MORE WILL UPDATE SOON!!