Nifty to remain weak below 10,490; top 5 stocks which can give up to 5% return

The index has to cross 10490 levels decisively to move higher and if it fails to cross this level, weakness could be seen towards 10290 and 10150 levels.

   

Benchmark indices trimmed losses and closed marginally lower on Wednesday after banking stocks recovered. Shares fell for a second straight day following a weak trend in Asian equities after US stocks declined as President Donald Trump replaced his secretary of state.

In key economic data released on Wednesday, India's annual wholesale price inflation eased to 2.48 percent in February for the third straight month after touching an eight-month high in November, helped by a softer rise in food and fuel prices.

Technical Outlook

Nifty

Nifty has formed 'Hanging Man' followed by 'Shooting Star' candlestick pattern around supply zone of 10450-10490 levels on daily scale. It opened with gap-down but recovered from day's low and closed with loss of 15.95 points.

The index has to cross 10490 levels decisively to move higher and if it fails to cross this level, weakness could be seen towards 10290 and 10150 levels. Furthermore, RSI (14) has given a positive crossover which is a bullish sign.

Nifty Bank

The index has outperformed benchmarks led by strong short covering rally in PSU & Private banks after-market anticipated that RBI might cut key policy rates by 25 bps in August, which will lead to lending rate cuts, and in turn support growth.

It has formed Bullish candle and closed marginally above its 200 SMA of 24807 levels signifying a rally to continue in near term. But strong hurdle seen around 25100. It has to cross this level decisively to move further higher.

Below are the 5 stocks which can give up to 5% return in the near term:

Tech Mahindra | Rating: Buy | Target: Rs 652, stop loss: Rs 628 | Return: 2%

Canara Bank | Rating: Buy | Target: Rs 272, stop loss: Rs 250 | Return: 5%

Sun TV Network | Rating: Buy | Target: Rs 955, stop loss: Rs 910 | Return: 1%

TVS Motor Company | Rating: Buy | Target: Rs 657, stop loss: Rs 631 | Return: 2%

Britannia Industries | Rating: Sell | Target: Rs 4735, stop loss: Rs 4900 | Return: 2%

MORE WILL UPDATE SOON!!

Time to build all-weather portfolio! Top 10 stocks could give up to 58% return

We believe, that the investor in the age bracket of 35-40 years should allocate at least 70-75 percent of his portfolio into equities/MFs, 20-25% in fixed income and the balance should be in cash.

   

Global headwinds, rise in crude oil prices, political stability, earnings not catching up, or just plain old profit booking are some of the key factors which can lead to volatility in equity markets.

The idea is to make a portfolio which can weather out all storms. Normally, it is a difficult thing to achieve because equities are not risk-free and external factors will impact your portfolio in one way or another.

Investors should focus on making a portfolio which should fall less than the market and outperform when the market starts rising. Well, a brilliant idea but a difficult thing to achieve.

To make such a portfolio, it should have stocks marketcap themes and across sectors to achieve benefits of diversification. There are many factors, both micro and macro, which would be important to consider when investors are planning to make a portfolio that can weather all storms.

Our macro research looks at the effect of various cycles (industry, interest rate, commodity, exchange rate etc.), regulation, Govt. policy impact, top-down drivers, evolving themes etc.

Our management quality research looks at the ability of managements to deliver outperformance irrespective of the environment or cycles - gain market share, create new growth opportunities, build new efficiencies, being ahead of the curve on changes, reduce its cyclicality, have shock absorbers, balance sheet improvement etc.

The report further added that they look at the management who can ‘walked the talk’ for us to gain confidence that the outlook is not an extension of their past. The portfolio bias has shifted from growth and cyclical to either value or quality defensives.

Here are few stocks as highlighted by SPARK Capital in Large caps (>USD 5 billion market cap) – Ashok Leyland, Bharat Forge, Yes Bank, UPL and Cipla. In the large mid-caps (USD 2 billion-USD 5 billion market cap) – GlaxoSmithKline Consumer, Voltas, Federal Bank and Thermax. In the mid-caps (<USD 2 billion market cap) – Aditya Birla Fashion, VIP Industries, Zydus Wellness, Blue Star, Finolex Industries and Persistent Systems.

How should one construct their portfolio?

Investors should be guided by their goals because if you are investing for the long run, equity still remains the top priority. At the same time, allocating a small part to fixed income is always justified for a variety of reasons.

We believe, that the investor in the age bracket of 35-40 years should allocate at least 70-75 percent of his portfolio into equities/MFs, 20-25% in fixed income and the balance should be in cash.

“For first-time investors with a corpus of Rs 10 lakh, it is advisable to invest larger share in mutual funds (i.e. 66-75 percent). For financially savvy investors, we would suggest the person has a 50:50 mix between direct equities and mutual funds.

We have collated stocks from various brokerage firms which can give up to 58% return in the next one year:

Brokerage Name: Angel Broking

Dewan Housing: BUY | Target: Rs 720| Return 38%

Angel Broking maintains a buy rating on Dewan Housing with a target price of Rs 720, backed by healthy capital adequacy and increasing demand for home loans DHFL’s loan book is expected to report 23 percent loan growth over next two-three years.

The domestic brokerage firm expects the company’s loan growth to remain 23 percent over the next two years and earnings growth is likely to be more than 28 percent. The stock currently trades at 1.9x FY2019E ABV. We maintain buy on the stock with a target price of Rs 720.

Karur Vysya Bank: BUY | Target: Rs 160| Return 58%

Angel Broking maintains a buy rating on Karur Vysya Bank with a target price of Rs 160. It had a fairly strong loan CAGR of 14.9 percent over FY11-17. However, FY17 was the year of consolidation and loan book grew by only 4.7 percent.

The domestic brokerage firm expects the loan growth to pick up to 11 percent over FY17-19, and the deposit growth is expected at 9 percent during the period.

Angel Broking expects KVB to post a strong loan book and earnings CAGR of 11 percent and 22 percent over FY2017-19E. The stock currently trades at 1.4x FY2019E ABV.

HSIL: BUY | Target Rs 510| Return 27%

Angel Broking maintains a buy rating on HSIL with a target price of Rs 150. HSIL Limited (HSIL) is an Indian company, which offers sanitaryware products, faucets, and glass bottles.

The company’s 46 percent revenue comes from building products division, 43 percent from Packaging products division and balance from others division.

The market is expected to grow at 10 percent CAGR going forward on the back of increasing disposable income, urbanization, evolving preferences and government initiatives (Swachh Bharat, Housing for All, Smart cities, etc.).

Siyaram Silk Mills: BUY | Target: Rs 851| Return 35%

Angel Broking maintains a buy rating on Siyaram Silk Mills with a target of Rs 851. The company has strong brands which cater to premium as well as popular mass segments of the market. Further, it entered the ladies' salwar kameez and ethnic wear segment.

Going forward, we believe that the company would be able to leverage its brand equity and continue to post strong performance.

Going forward, we expect the company to report a net sales CAGR of 12 percent to Rs 1,981 crore and adj.net profit CAGR of 16 percent to Rs 123 crore over FY2017-19E on back of market leadership in blended fabrics, strong brand building, wide distribution channel, strong presence in tier II and tier III cities and emphasis on latest designs and affordable pricing points.

At the current market price, the stock trades at an inexpensive valuation. We have a buy recommendation on the stock and target price of Rs 851.

Maruti Suzuki Ltd: BUY | Target:Rs 10619| Return 20%

Angel Broking maintains a buy rating on Maruti Suzuki with a target price of Rs 10,619. The Automobile sector is expected to benefit from the GST implementation.

The sector has seen a pick up in the volumes in FY17 as there were several positive factors like a normal monsoon and lower interest rates.

Due to the favorable business mix, the company has also been seeing improvement in the margins. The company has already moved from 11-12 percent EBITDA margin range in FY14 to current 17 percent margin range in Q2FY18.

Together with higher operating leverage at Gujarat plant, increasing Nexa outlets, and improving business mix, we believe that company has further room to improve its margins.

Brokerage Firm: Sharekhan

Bharat Electronics Ltd: BUY | Target: Rs 220| Return 46%

Sharekhan maintains a buy rating on Bharat Electronics with a target of Rs 220. Bharat Electronics Limited (BEL) reported better-than-expected revenue performance in Q3FY18, while margins missed the mark during the quarter. Healthy order book position provides strong revenue visibility. Preferred defence play, maintain Buy with an unchanged price target of Rs 220.

Birla Corp: BUY | Target Rs: 998| Return 33%

Sharekhan maintains a buy rating on Birla Corporation with a target price of Rs 998. For Q3FY2018, Birla Corporation Limited (BCL) reported consolidated operating profit of Rs 139 crore, lower than our and street estimates on account of higher operating cost.

The cost rationalisation and ramp-up at acquired assets remain key for improvement in profitability. The brokerage firm maintains a positive view on BCL.

Kajaria Ceramics Ltd: BUY | Target: Rs 611| Target Rs 7%

Sharekhan maintains a buy rating on Kajaria Ceramics with a target of Rs 611. The net earnings of Kajaria Ceramics (Kajaria) declined in Q3FY2018 due to higher power costs, despite improvement in volumes. Organised tile players are facing near-term headwinds, but the lowering of GST rate on tiles gives a silver lining.

Despite near-term headwinds, the structural, long-term growth story of the sector remains intact. Sharekhan believes that the recent correction provides an opportunity for the long-term investors.

Britannia Industries Ltd: BUY | Target: Rs 5500| Return 14%

Sharekhan maintains a buy recommendation on Britannia Industries with a target price of Rs 5500. Britannia’s Q3FY2018 revenue grew by 13 percent on a comparable basis due to double-digit volume growth. The Operating efficiencies led to margin expansion of 225BPS to 15.5 percent.

The Innovation and distribution expansion remain the key growth drivers for Britannia. The company is planning to launch 50 new products in the biscuits and adjacent categories by the end of FY2019.

Benign input prices and operating efficiencies are some of the key factors which are likely to drive margins in the near term.

Divi’s Laboratories Ltd: BUY | Target: Rs 1275| Return 21%

Sharekhan maintains a buy call in Divi’s Laboratories with a target price of Rs 1275. The company reported muted Q3FY2018 numbers. The net sales grew by 6.3 percent to Rs 1037.9 crore.

Success resolution of import alert and warning letter in a short span was a big positive. Sharekhan anticipates business to improve in the days to come and hence, maintain Buy rating with an unchanged target price of Rs. 1275.

MORE WILL UPDATE SOON!!

Buy, Sell, Hold: 4 stocks and 1 sector are on analysts’ radar on March 15, 2018

Century Ply, Wipro and FMCG space, among others, are being tracked by investors on Thursday.

   

Strides Shasun

Brokerage: Macquarie | Rating: Outperform | Target: Rs 996

Macquarie said that the firm has received US FDA approval for HIV drug Efavirenz Tablets. Further, it expects Efavirenz to be a decent opportunity as co becomes second entrant post Mylan. It also expects Strides’ earnings momentum to pick up in FY19.

Wipro

Brokerage: Axis Capital | Rating: Hold | Target: Rs 300

Axis Capital said that the firm is in definitive agreement to divest hosted data centre services business to Ensono for $405 m. The firm also believes that divesture of ailing managed data center biz is a step in right direction.

Brokerage: Credit Suisse | Rating: Underperform | Target: Rs 290

The brokerage house said that the deal with Ensono is likely to close by Q1FY19.

Century Ply

Brokerage: CLSA | Rating: Buy | Target: Rs 420

CLSA said that it is seeing a rising preference for medium density fibre (mdf) over plywood. The firm’s MDF plant achieved cash breakeven earlier than expected. It expects to be the key growth driver going forward. It also sees newly-commissioned MDF plant to contribute 17 percent to revenue by FY20.

Shriram Transport

Brokerage: Jefferies

Jefferies believes that the company should benefit from stronger CV volumes. Despite rising bond yields, net interest margin should be stable, it said, adding that credit cost could fall, driving 34% EPS CAGR & 430 bps RoE expansion over FY18-20. The stocks’ valuation appears reasonable, it added.

FMCG

Brokerage: Goldman Sachs

The global investment bank forecasts rural income to grow at an 8.5% CAGR over the next five years. Further, it believes that packaged food and beverage segment will be the biggest beneficiary of increase in consumption spend.

Among stocks, it has a buy call on Britannia, but has downgraded HUL to sell. This is due to limited opportunity to expand its distribution. The brokerage has also downgraded Marico to Sell as it feels Saffola and value added hair oils face competitive pressures. It has upgraded Jubilant Food to buy for continued progress on driving SSSG growth. Colgate and Nestle have been upgraded to neutral post their underperformance.

Meanwhile, it is positive on retailers as the market there formalizes. Its top picks include Avenue Supermarts and Titan with a buy call.

MORE WILL UPDATE SOON!!

Looking for multibaggers? Nearly 30 stocks turned smallcaps from midcaps in 2018

Most of the stocks might have technically moved to a midcap category or a smallcap but they still remain to be part of respective indices. Many stocks which gave multibagger returns in the year 2017 have corrected in double digits so far in the year 2018, and any drop could be used as a good buying opportunity.

The year 2017 was full of surprise as Indian market climbed all wall of worries to hit fresh record highs and the momentum continued till the first month of the year 2018, but then momentum fizzled out which led to a 10 percent kind of fall in benchmark indices from record highs.

The S&P BSE Sensex climbed Mount 36K while Nifty rose above 11,100 in the month of January but market lost momentum soon after the Budget was announced and global cues turned unfavorable.

Well, 2018 has been the year of a disappointment so far. Why do we say that? Because, data suggest that stocks in the Ultra largecap category, largecap, midcap and even smallcap in terms of market capitalization came down in the year 2018 as compared to the year 2017.

However, stocks in microcap category increased in the year 2018 which suggests that plenty of stocks witnessed huge correction which brought their market cap below Rs 1000 crore.

Most of the stocks might have technically moved to a midcap category or a smallcap but they still remain to be part of respective indices. Many stocks which gave multibagger returns in the year 2017 have corrected in double digits so far in the year 2018, and any drop could be used as a good buying opportunity.

Most of the stocks largely saw a correction which was more technical in nature while the fundamental aspect of some of these stocks still remain intact, suggest experts.

Shankar Sharma of First Global in an interview with CNBC-TV18 said that whenever markets correct, investors should use these dips and pick smallcap stocks which are displaying earnings growth potential.

The very reason Sharma likes smallcaps because they don’t get impacted by the worsening macro story (rise in interest rates or inflation).

However, most experts feel that smallcap theme, in general, might not be able to outperform in 2018 (select smallcaps could outperform) compared to largecaps which might hog the limelight. This is evident from data which shows less volatility in largecaps space compared to mid or smallcaps.

From the Ultra Largecap category in which the market capitalization is more than Rs100,000 crore as many as 3 stocks lost the tag of ultra largecaps which include names like Bajaj Finance, BPCL, and Tata Motors.

On the other hand only one stock, i.e. IndusInd Bank entered the Ultra Largecap space with a market capitalization of over Rs 100,000 crore in the year 2018.

 

In the largecap space which has a market capitalisation in the range of Rs 20,000 to Rs 100,000 crore, as many as 10 stocks lost the tag of largecaps in the year 2018 which include names like Bank of India, Canara Bank, Godrej Industries, MOSL, NBCC, PNB Housing Finance, RBL Bank etc. among others.

Technically, 4 stocks entered or reclaimed their tag in the largecap space which includes names like Castrol India, Gruh Finance, Jindal Steel & Power, and L&T Infotech.

  

After a blockbuster rally in the year 2017 in which midcaps took the lead, most analysts’ prefer largecaps in the year 2018 to lead the rally.

The valuations have come off from the recent highs which makes largecaps a preferred play. Mid-caps after witnessing correction are still trading at higher valuations than large caps so we do not rule out further correction if earnings falter in the coming quarters.

In the midcap space, nearly 30 stocks technically slipped from the midcap category so far in the year 2018 which include names like Allahabad Bank, Allcargo, BEML, DCB Bank, MMTC, Jaiprakash Associates, PNC Infratech, Rallis India, Equitas Holdings, Godfrey Phillips etc. among others.

MORE WILL UPDATE SOON!!

Volatility to remain in March expiry; top 5 stocks which can give up to 15% return

Buying optimism intact in quality names at lower levels; however, buying in momentum is advised to be avoided as market is braced for a time correction post the corrective rally in prices so that valuations gets attractive.

   

The Nifty 50 manages to close in green and above its 100-EMA (10404) while Sensex ended in red after a volatile trading session on Tuesday.

The markets witnessed a strong up move led by sharp short-covering on Monday but on Tuesday the key indices fell sharply from day’s highs indicating consolidation/range-bound phase with intraday volatility to continue in near term.

So, far the Nifty has respected its 200-DMA (around 10,145 levels), which will continue to act as a major support while Resistance is seen around 10,600-10,650 levels.

Positive macro cues like robust Factory Output, lower retail Inflation, and Good Direct Tax collection numbers will keep the buying optimism intact in quality names at lower levels; however, buying in momentum is advised to be avoided as market is braced for a time correction post the corrective rally in prices (Nifty down almost 9-10 percent from peak) so that valuations gets attractive.

On the options front, maximum Put open interest of 48.84 lakh contracts stood at strike price 10,000 followed by 10,400, which now holds 45.69 lakh contracts.

While Maximum Call open interest of 48.52 lakh contracts is seen at strike price 10,500, followed by 10,700, which now holds 40.66 lakh contracts.

As per the option data, the Nifty is likely to remain in a narrow range for the next few trading sessions with immediate support stands around 10,400 levels whereas 10,500 will act as a minor hurdle and above that 10700 will be a major resistance in the March expiry.

India VIX marginally fell 0.2 percent at 14.46; however, it is still trading above the crucial mark of 13.00 which indicates mild volatility to remain in this expiry.

Here is a list of top five trading ideas by experts which can give up nearly 15% return in the short term:

Indian Bank: Buy | Target: Rs 336| Stop loss: Rs 269| Return potential: 14.7%

The stock has bounced back from lows after prices filled the gap, which was made on October 25, 2017 and around Rs 270 levels.

Positive divergence is seen in Relative Strength Index (RSI) along with positive crossover in stochastic means that the stock has made a temporary bottom and is set for a decent bounce back.

Investors can accumulate the stock in the range of Rs 287-294 for the upside target of Rs 336 and a stop loss below Rs 269 on a closing basis.

Titan Company Ltd: Buy | Target: Rs 914 | Stop loss: Rs 815 | Return 7.3%

The stock has given a consolidation breakout above Rs 840 levels with higher volume on the daily scale. The Relative strength index (RSI) and MACD have given positive crossover and are in Buy mode. Traders can buy the stock at current level and add on dips around Rs 840-842 with a stop loss below Rs 815 for the target of Rs 914.

Hexaware Technologies Limited: Buy | Target: Rs 423 | Stop loss: Rs 360 | Return: 10.2%

On the daily scale, the stock has given a breakout on Monday from a symmetrical triangle pattern above Rs 366-367 levels.

The Daily MACD has continued to remain in buy mode and Relative strength index (RSI) is showing upward momentum. OBV—On Balance Volume is making a fresh high from the previous top and this indicates that price may move towards a new high in coming days.

Investors can accumulate the stock in a range of Rs 378-384 with a stop loss below Rs 360 (closing) for target of Rs 423.

NBCC (India) Limited: Buy | Target: Rs 223 | Stop loss: Rs 181 | Return: 13.8%

After correcting significantly from its recent peak, the stock has made a Hammer-like candle on Monday around support zones followed by a strong up move on Tuesday with higher volume.

The positive divergence is seen in Relative Strength Index (RSI) and MACD has given positive crossover. One can buy the stock at current level and also add on dips to Rs 190 levels with the stop loss below Rs 181 (close) for target of Rs 223.

Pidilite Industries Ltd: Buy | Target: Rs 956 | Stop loss: Rs 870 | Return: 6.22%

The stock has given a breakout from symmetrical triangle pattern above Rs 896 levels with the moderate volume on the daily scale. The Daily Relative strength index showing upward momentum and MACD is making attempt to cross its signal line.

OBV—On Balance Volume is making a fresh high from the previous top and this indicates that price may move towards a new high. Traders can buy the stock in the range of Rs 895-900 with a stop loss below Rs 870 (close) for target of Rs 956.

MORE WILL UPDATE SOON!!

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!!