The upcoming results of state elections in December and general elections in 2019 will give enough entry points for investors as markets are likely to remain volatile, suggest experts
While S&P BSE Sensex is down about 10 percent from the highs it hit in August, many small, mid and large-cap stocks have corrected way more than that in just a matter of months.
There are local and global triggers that led to the sudden fall in markets. On the macro front, the rise in crude oil prices as well as fall in rupee weighed on investor sentiment.
However, investors can use the opportunity to build their portfolio by buying into quality stocks with an investment horizon of 1-2 years, suggest experts.
The September quarter results were a mixed bag failed to lift investor sentiment. The upcoming results of state elections in December and general elections in 2019 will give enough entry points for investors as markets are likely to remain volatile, suggest experts.
“We have a preference for largecaps post the correction in valuations, with continued volatility and with important events (state elections) ahead, we see opportunities emerging in the mid-cap space also,” Gaurav Dua, Head of Research, Sharekhan by BNP Paribas told Moneycontrol.
“Improvement in the macro environment does have a positive impact on equities. Easing of crude oil prices, stability in rupee and its possible fallout on monetary policy has aided sentiment. Along with domestic macro factors, the sentiment in the Indian equity market has also been aided by the recent rally across emerging markets due to signs of peaking out of the continuous strengthening of the US Dollar,” he said.
On the sectoral front, Pankaj Pandey, Head-Research, ICICIdirect.com told Moneycontrol that he is positive on pharma (stabilised US, strong growth in India, improved margins), corporate banks (peaked out NPA cycle, asset resolution), IT (strong deal pipeline & valuation comfort) and capital goods (strong order inflows, improved working capital cycle).
Here is a list of top 10 stocks from different experts which are worth a buy for a holding period of 1-2 years:
Analyst: Vipin Khare, Director- Research, William O'Neil India
ICICI Lombard General Insurance is the country's leading private sector general insurance company with a market share of 16.8 percent in that space. Overall, it is the fourth-largest player and held a market share of 8.2 percent as of March.
Few regulatory factors such as increasing FDI limit to 49 percent from 26 percent and mandatory cover of third-party motor insurance to three years for four-wheelers and to five years for two-wheelers bodes well for the industry.
In addition, the Company is investing heavily in emerging technologies such as artificial intelligence, automation, and machine learning to remove human intervention in the distribution of products and service claims, which helped the Company increase its market share in travel insurance to 24.9 percent in FY 2018 from 20.8 percent in FY 2017.
In the engineering segment, it went up to 11.2 percent from 9.8 percent, while fire insurance rose to 8.5 percent from 7.5 percent. The marine insurance increased to 12.7 percent from 11.7 percent.
Divis Laboratories is a global manufacturer of active pharmaceutical ingredients and intermediates for generic drugs. The Company operates through four manufacturing facilities at two sites and earns nearly 87 percent of its revenue from exports.
The Company reported a strong set of numbers in Q2. Revenue from operations grew 44 percent on a year-on-year (YoY) to Rs 12,850 crore, beating consensus.
The net profit (PAT) was at Rs 3,970 crore (+92% YoY), comfortably ahead of expectations. The strong results were driven by normalization of operations at the manufacturing sites after obtaining U.S. FDA clearance.
With increasing opportunities in its generic business following the supply disruption in China, the Company announced capex of Rs 1,200 crore for two Brownfield projects at its two manufacturing units.
Both the units will get an investment of Rs 600 crore each. An additional Rs 300 crore will be allotted to debottlenecking programs for capacity expansions of existing projects. The projects are expected to be completed by the end of 2019.
Vinati Organics Ltd. is engaged in the manufacturing of organic and inorganic chemical compounds and speciality organic intermediaries such as isobutyl benzene (IBB), ATBS, and isobutyl benzene, among others.
In its Q2, earnings jumped 124 percent and revenues were up 57 percent on a YoY basis. The performance was aided by production expansion and improved EBITDA margins.
EBITDA margins were 37.7 percent for the quarter, as against 28.6 percent for the corresponding quarter in the previous year.
After the only other credible ATBS manufacturer announced its exit, the Company is at set to enjoy higher margins with the weaker bargaining power of buyers and almost no threat of new entrants.
This has translated into an elevated EBITDA margin of 37.7 percent compared with 28.6 percent in the same quarter the previous year and five-year average margin of 27.7 percent.
VIP Industries manufactures a wide range of hard and soft-sided luggage under brands such as VIP, Skybags, Alfa, Aristocrat, Carlton, and Caprese. In India's organized luggage market, the Company enjoys more than 50 percent share.
Growth in the aviation industry is an important factor that drives the luggage industry's performance. Domestic passenger traffic expanded at a CAGR of 13 percent during FY 2013-2017.
In June, India's domestic passenger traffic grew 18.4 percent YoY, while it rose 17.3 percent in 2017.
In addition, the introduction of GST and its reduction to 18 percent from 28 percent augurs well for organized luggage makers as it reduces the price gap between the organized and unorganized segments.
With a market share of more than 50 percent, VIP Industries is well-positioned to benefit from a level-playing field post-GST.
Havells India is involved in the manufacture of electrical and electronics durables in the consumer as well as industrial segments.
The top-line grew more than 20 percent for the seventh quarter in a row as a result of market share gains in fans, water heaters, and other small appliances, and first-mover advantage in the Internet of things (IoT) enabled devices.
In addition, strong innovation and continuous launches in different categories are expected to continue expanding its market share in fans, grooming appliances, and brown goods (iron, toasters, mixers, and grinders, etc.).
Analyst: Pankaj Pandey, Head-Research, ICICIdirect.com
ABFRL has delivered a superior performance in profitability terms for H1FY19, with EBITDA margins expanding 200 bps YoY and PAT coming in at Rs. 48.3 crores compared to a net loss of Rs. 30 crores in H1FY18.
We anticipate H2FY19 will perform better, particularly Q3FY19 on account of a shift in major festivals. We expect revenue, EBITDA to grow at a CAGR of 14 percent, 24 percent, respectively, in FY18-20E.
We like Tata Steel for its integrated operations (100% iron ore and ~30-35% coking coal), which aids in clocking higher EBITDA/tonne vis-à-vis its domestic peers even in increased input cost scenario.
Given improving industry credit growth and a possible shift of business from NBFCs, SBI is best placed to ride the opportunity. We expect credit offtake to pick up to 11 percent CAGR in FY19-20E.
The bank is also poised to benefit from the faster resolution of NCLT accounts. The pick up in growth and focus on maintaining credit cost will result in sharp improvement in its earnings trajectory.
The company plans to add 20 new hotels through management contracts that will further boost the topline, going forward. In addition, cost rationalisation and RevPAR growth are expected to drive margins in FY18-20E. Hence, we have a positive view on the stock.
Given strong backlog, front-loading of order inflows, improving balance sheet quality (CFO generation), the company is well placed to deliver a 14.2 percent and 20 percent revenue and PAT CAGR in FY18-FY20E, respectively.Disclaimer: The views and investment tips expressed by investment experts on Moneycontrol are their own, and not that of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.The Great Diwali Discount!
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