Oct 30, 2013, 06.13 PM | Source: Moneycontrol.com
ICICIdirect.com has recommended State Bank of India, Wipro, Bajaj Auto, Bajaj Electricals and Entertainment Network India as its Muhurat 2013 picks.
, ICICIdirect.com |
H1CY13 turned out to be a dull year for domestic equities. The 8 percent de-growth in cumulative earnings for Sensex companies in Q1FY14 portrays a worrisome forecast for the rest of the year after five-year CAGR of 9 percent as GDP growth and ensuing forecasts slump to record lows. Scare of a 1991 like crisis, as exhibited, in the volatile |/$ exchange rate coupled with depleting growth has skewed investor’s preference for quality stocks resulting in a divergence in stock and sector performances. Capital intensives and industrials have been losing their dominant stature with contribution in Sensex EPS declining from 55 percent in FY09 to 36 percent in FY13. This is also reflected in their underperformance on the bourses (albeit some short-term rallies have come in this sector on the back of investors pinning their hopes on the fact that some relief may come through)
In such perplexing times both global (timing of QE tapering, quality of growth improvement in developed nations and a potential geopolitical Arab spring) and domestic (record low GDP, paralysed capex cycle, slow policy reforms, a hawkish RBI and upcoming Lok Sabha elections) developments are leading to massive investor anxiety as the BSE Sensex is almost approaching life-time highs. This though is on the back of delayed QE tapering and consequent deployment of excess global liquidity back into equities across the globe (FIIs in spite of all the gloom and doom have poured in ~$15 billion YTD) making the situation even more bewildering
However, even though markets have exhibited a strong rally in the past few months, coupled with rising volatility, we would still stick with quality names in the IT, consumer/media, auto and financials space given a sudden pullback in global equities may lead to massive profit booking on the Indian bourses. Hence, our stock selection criterion focuses on companies that possess quality balance sheets (strong cash flows, low leverage and no/lesser capex intensity) relative to earnings growth (which though they may have moderated during the ongoing downturn will bounce back strongly given the uptick in economic recovery)
Muhurat trading picks
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