Benchmark indices ended sharply lower on July 10 with Nifty falling below 11,500 at close for the first time since May 17 this year. The market breadth was tilted in favour of sellers.
Markets may continue to remain under pressure in the near term, especially the mid and small-cap segments, also corporate earnings will play a big role in shaping market direction going ahead amid subdued economic growth.
The data for industrial production for May and CPI inflation for June will be released on July 12, which will be closely watched by the street.
Now that the two major events are out of the way, investors will start looking for the next breaking news to drive the markets. India's budget outlined some reforms that will support the economy. The budget indicates that the BJP will continue its economic reform efforts in its second term as well.
One should still prefer largecaps but also select good quality midcaps can't be ignored as the valuations look attractive.
We believe a broad-based rally in the stock market is likely for the next 2-3 years. The long term economic backdrop for the Indian economy looks good, real GDP should grow at a faster pace in the long term.
The long-term investment opportunity in India remains firmly in place, so the right time has come to accumulate below-mentioned stocks in a gradual manner.
City Union Bank: Buy | Target: Rs 228 | Return: 15 percent
We expect its stable asset quality, sturdy capitalisation and focused SME & retail lending strategy to keep its profitability and margins strong in the medium term. The loan book grew an impressive 17 percent YoY, largely driven by secular growth in all its major portfolios.
We expect high-teen growth in the medium term to persist, largely driven by the SME and retail books. Besides, with 15.6 percent capital adequacy, the bank is adequately capitalised for high-teen loan growth in the medium term.
Hindustan Unilever: Buy | Target: Rs 2,250 | Return: 31 percent
Hindustan Unilever (HUL) reported revenue at Rs 9,945 crore in Q4FY19, registering a growth of 9.3 percent YoY. The quarter witnessed growth in its key segments. Domestic consumer growth was 9 percent with underlying volume growth at 7 perent. We expect HUL to grow at a CAGR of 13.5 percent in the next two years. We estimate the company to report revenues of Rs 45,756 crore in FY-20.
Siemens: Buy | Target: Rs 1,644 | Return: 35 percent
Siemens registered strong sales growth on the back of a healthy order book in FY18. The recent jump in railway capex and the likely strengthening of the same is likely to continue. Siemens is likely to be one of the biggest beneficiaries of this. The likely new order inflow will further expand margin. We expect considerable order book expansion of the company along with continued improvement in margin.
The author is Vice President - Equity Advisory at Anand Rathi Shares and Stock Brokers.
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