Kshitij Anand Moneycontrol News
Indian markets closed FY18 with gains of 10-11 percent but FY19 is unlikely to be a smooth ride for investors; however, stocks which are linked to Indian economy should do well, suggest experts.
Last week the Reserve Bank of India (RBI) estimated that the real Gross Domestic Product (GDP) growth for FY20 will range from 7.4 to 7.9 percent. The Monetary Policy Committee (MPC) noted that the April-June GDP growth is seen at 7.1 percent, and the July-September GDP growth is seen at 7.4 percent.
If the economy starts doing well experts feel that economy focused stocks which are in sectors such as consumptions, financials, autos, metals, cement etc. among others will do well.
“It is best to take a top-down while picking stocks rather than a pure bottom-up one. We think we are in a very strong consumption phase of the economy and all proxies to consumption should be bought into,” Harendra Kumar, Managing Director-Institutional Equities at Elara Capital told Moneycontrol.
“We think that FMCG, aviation, and cement sectors are likely to do extremely well. Within that a Hindustan Unilever, Marico, Nestlé India, SpiceJet, Heidelberg Cement would do well,” he said.
Kumar further added that apart from this I think the metal sector could be a strong outperformance to the broader index and within this space Jindal Steel and Vedanta could be some of the names that one could look at.
After a blockbuster calendar year 2017 and FY18, the market is likely to consolidate in the next 12 months of FY19. Investors are advised to stay with quality stocks and avoid any leverage play.
The appreciation in the equity market in the year 2017 was primarily driven by valuation multiple expansion and not earning expansion. However, experts feel that March quarter could be a game changer and India Inc. could register a growth rate of 15-20 percent in FY19.
“The domestic equity market earlier expansion was mainly driven by valuation multiple expansion driven by stable macro & political environment in the country and high liquidity in the global market,” Sumeet Bagadia Associate Director Choice Broking told Moneycontrol.
“Further expansion in multiple is unlikely to happen again, though the concern of its downgrade increased with the rise in political uncertainty in India, rising concerns over inflation, emerged trade war in the global economy,” he said.
Bagadia further added that FY19E EPS is expected at Rs1,953 and latest reported earnings trend also showing progress in earnings momentum, but the further direction of the market is mainly dominated by macro events. Sensex at 33,000 is still trading at a P/E (x) of 22.5 to latest reported TTM EPS.
Here is a list of top 12 wealth-creating ideas by experts with a time horizon of next 2-3 years:
D.K. Aggarwal, Chairman and Managing Director, SMC Investments, and Advisors
Marico plans to develop a range of brands which would be available for online sales over the next few years. The company believes that the digitisation in the consumer packaged space is a huge opportunity for long-term growth and to tap the same it has created a new team. The Engine 2, is focussed on creating and incubating new categories.
Marico is expanding its food product portfolio by entering the Rs 450-crore soups segment under the Saffola brand.
The move is part of its strategy to launch healthy, in-between snacks and at the same time add premium products to its portfolio as it targets a 70 percent increase in revenue to Rs 10,000 crore by 2020.
The company is witnessing healthy financial growth across all the business segments. Diversification efforts paid off as growth in the overall business is well supported by the robust growth witnessed in the new businesses.
According to the management, it expects to maintain strong growth momentum in all three new business segments as well as gold loan segment.
As per the company, the demand has improved and due to brightened economic outlook, the company expects to achieve 20 percent growth in consolidated AUM over next 3 years, with gold loans growth likely at 15 percent.
The company has been continuously growing in each business parameter and it is expected that it would be directly benefitted by the Government initiatives such as “Housing and power for all”. It is best placed to attain scale across businesses with its new SBU (Strategic Business Unit) structure and focused product-wise branding strategy.
It has pioneered the concept of the exclusive brand showroom in the electrical industry with ‘Havells Galaxy’. It became the first FMEG Company to offer doorstep service via its initiative ‘Havells Connect’.
The company has witnessed consistent growth in each of its business segment. The debt-equity ratio for the company is nil at a standalone level and 0.19 at a consolidated level.
Its balance sheet is robust and it augurs well for the company to venture into its next phase of growth. Turnaround across all the divisions led by global recovery for company’s products.
It has completed the strategic relocation of its plants from South Africa and China in India and management targets to ramp up capacity from these plants in the next one year and expects around Rs1000 crore growths in the top line.
Brokerage Firm: Reliance Securities
Federal bank is gradually coming out of the scenario marked with higher provisioning and continued stress on asset quality. The management expects credit cost to remain in the comfortable level of 60-70bps in FY19.
Looking ahead, we expect the strong traction in earnings to continue owing to robust growth in loan book, moderate credit cost, and healthy margins.
HG Infra has been gaining a healthy traction for the last two years on the backdrop of consistent order book addition and improving execution expertise.
Further, with the improvement in financial pre-qualification post fundraising and enormous opportunity in its key vertical, we expect HGI’s revenue and earnings to clock 31 percent and 46 percent CAGR, respectively through FY17-FY20E.
Apollo Tyres performance is expected to improve owing to steady stabilisation in Hungarian operations and shifting to OEM segment, despite the impact of the steady rise in input cost on the near-term margin. At CMP, the stock trades at 13.0x and 9.9x FY19E and FY20E earnings, respectively, which appear to be attractive.
Analyst: Sumeet Bagadia Associate Director Choice Broking
With the growing branch network of the bank as well as increasing CASA base, the likelihood of strong fee income inflow and diversified loan book with superior assets quality, IndusInd Bank is likely to emerge far stronger over the next few years.
We are anticipating the improvement in the power distribution performance (specially SEBs) which will lead to higher investment in the distribution side thereby improving the growth prospects of Apar industries.
Improving rural income and launch of new model along with attractive valuation makes a strong entry point for medium to long-term investors.
It is a dominant player in south India and has a market share of around 10-15 percent in the Indian DI pipes industry. Since the government has decided to use DI pipes (and not canals) to improve the water supply infrastructure, demand growth of DI pipes is expected to grow 8-10 percent CAGR over the next couple of years.
Given the strong presence in low income segment of housing, GIC Housing Finance is expected to remain one the major beneficiaries of rising opportunities in affordable housing.
Disclaimer: The views and investment tips expressed by investment experts on moneycontrol.com are their own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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