Historically, the midcap and smallcap index haven’t given negative returns for two consecutive years, hence there is a good chance of a recovery from here on
The domestic stock market may experience some large swings in the next one-year, rather than having a smooth sailing. With general elections and Union Budget behind us, one can expect volatility to reduce in the immediate future. However, with the domestic financial sector facing increasing liquidity crisis, heightened tensions between the US and China with respect to tariffs on imported goods, falling crude oil prices and upcoming festive season, the Indian stock market is set for a bouncy year ahead.
Smallcaps and midcaps have underperformed since the last one-and-a-half year and are available at very attractive valuations. Historically, the midcap and smallcap index haven’t given negative returns for two consecutive years, hence there is a good chance of a recovery from here on.
Technically, the Nifty has entered bearish territory since the beginning of August as it is trading below its 200-DMA of 11,174. On the upside, 11,450-11,600 will act as a strong supply zone. Once the index manages to cross this level, a short-covering rally can be seen, with the index heading towards 11,900. On the downside, if the Nifty surrenders 10,900 levels, then things could get ugly, although this has a very low probability currently.
Here are five stocks that may provide hefty returns by next Independence Day.
Sun Pharmaceuticals Industries | Target: Rs 540 | Return: 29%
The Global pharmaceutical industry is at crossroads with increasing pressure from the governments and regulators over escalating drug prices. The industry, in general, has bottomed out led by Sun Pharma which is currently trading at levels which are 40 percent off its 52-week high of Rs 679 witnessed in September 2018. The company is focusing on exports and R&D as it has become imperative to innovate in order to survive for the long-term in the pharma business. This company can be a good bet for the investors in the long term especially at the current levels.
Bharti Airtel | Target: Rs 500 | Return: 38%
Despite tough competition in the telecommunications industry, Airtel is one company that has managed to stay strong. They have focused on increasing their ARPU by measures such as the introduction of minimum commitment plans, focus on digital innovations and offering differentiated services to its premium customers.
Airtel stock is currently trading at Rs 361 level, and once it manages to break its 52-week high of Rs 378, we can see the stock scale to new highs even approaching its all-time high Rs 500.
Kotak Mahindra Bank | Target: Rs 2,000 | Return: 34%
Kotak Mahindra Bank's main focus historically has been on maintaining good asset quality and controlling its NPAs. Its risk-weighted assets as a percentage of total assets have continuously declined and the bank currently enjoys industry-low NPAs.
The stock has consistently delivered positive returns since October last year and is trading near its 52-week high of Rs 1,555 (CMP: Rs 1,492). With the financial sector witnessing major liquidity crisis currently, Kotak Bank can be one name that stands out in this sector in the coming year.
Bajaj Auto | Target: Rs 3,300 | Return: 22%
Bajaj Auto has grown its domestic share in the motorcycles segments to over 20 percent recently, driven by its strategy of well-styled appealing products at the most affordable pricing. To add, they are increasingly focused on enhancing their exports portfolio and positioning themselves as the 'World's favourite Indian' brand.
The slowdown in the two-wheeler market is mainly coming from the smaller motorbikes, which has not been Bajaj's focus, and hence they are not affected by it too much. The stock has remain rangebound in the past few years and is currently priced close to its 52-week low of Rs 2,400 (CMP: Rs 2,720), and we see it bouncing back to at least Rs 3,300 level very soon.
ICICI Prudential Life Insurance Company | Target: Rs 500 | Return: 30%
Insurance cover in India remains very low at 8 percent and the life insurance penetration in the country is also low at 2.76 percent of the GDP versus the global average of 3.33 percent. With the growing workforce of the country and higher disposable income coupled with increased financial awareness, the insurance sector in general, and life insurance, in particular, should witness higher than usual growth in the coming time. ICICI Prudential has created a niche for itself in the ULIPs space and was the first life insurance company to list on the Indian bourses.
(The author is Co-Founder and CEO TradingBellls.)Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.