Sectorally, the auto sector in near term is expected to be volatile on account of the shift to BS-VI emission norms, whereas for the IT sector as a whole, the total contract value is expected to remain strong.
Weak domestic sentiments may keep the market volatile in the forthcoming days. On the global front, the on-going geopolitical tensions between US and Iran and the incessant US-China trade tension as against the still-solid economic data has left investors without a clear narrative.
With the majority of macro events behind us, corporate earnings will be the key driver for the India market henceforth. Monsoons and budget proposals seem to be fleeting concerns and we do not expect them to have a lasting impact on market sentiments.
Sectorally, the auto sector, in the near term, is expected to be volatile on account of the shift to BS-VI emission norms, whereas the total contract value of the IT sector is expected to remain strong. Also, we can expect FMCG companies to deliver tepid volume growth in Q1FY20 on the back of rural stress and tight liquidity.
We believe it is prudent to accumulate stocks of companies with strong growth prospects and sound fundamentals on dips as any correction in the prices should be viewed as a buying opportunity. The long-term investment opportunity in India remains firmly in place.
Here is the list of three stocks which could return 16-36 percent:
Berger Paints India: Buy | Target: Rs 365 | Return: 16 percent
The company has posted a topline CAGR of around 10 percent in the last 20 years led by urbanization and demand from re-painting. As per the management, 80 percent demand is coming from repaint and the rest is coming from the new paint.
In terms of growth, we continue to expect the Indian paints industry to grow at around 1.4-1.6 (x) of Indian GDP. We believe Berger Paints is better placed to capture incremental growth in the industry
Siemens: Buy | Target: Rs 1,644 | Return: 36 percent
Siemens registered strong sales growth on the back of a healthy order book in FY18. The recent jump in railway capex will further facilitate growth.
We expect considerable order book expansion of the company along with continued improvement in margin.
Hindustan Unilever: Buy | Target: Rs 2,250 | Return: 29 percent
Hindustan Unilever in Q4FY19 witnessed growth in its key segments. Domestic consumer growth was 9 percent with underlying volume growth at 7 percent. 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 45,756.1 crore in FY20.
(The author is Vice President - Equity Advisory at Anand Rathi Shares and Stock Brokers.)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.The Great Diwali Discount!
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