Near term trading sentiment remains weak; 3 stocks that can deliver double-digit returns

Siddharth Sedani

Indian benchmark indices continued its losing streak for the sixth consecutive day as Nifty finished below 11,300 level. Overall trading sentiment remains weak in the near term due to taxation issues, dull earnings and slowing consumption.

Also, oil prices have nudged higher on rising tensions over Iran and a sharp fall in US crude stocks, although worries about weak demand will continue to keep a cap on gains. Markets are expected to be volatile in the near term on account of broad events including US Fed policy meeting scheduled on July 30-31, the progression of monsoon, upcoming RBI policy and the results of various companies.

Other important factors such as oil prices, movement of rupee and investment trend by overseas investors would also influence trading in the market. Though slowdown issues could drag the markets in the medium term, it gives an investment opportunity for long term investors who have a horizon of more than 2-3 years.

We believe that for companies with strong growth prospects and sound fundamentals, it would be prudent to accumulate stocks on dips as any correction in the prices should be used as a buying opportunity.

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Siddharth Sedani

Vice President - Equity Advisory|Anand Rathi Shares and Stock Brokers

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Here are three stocks which can return in double-digits:

Berger Paints India: Buy | Target: Rs 365 | Return: 12 percent

The company has posted a top-line 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.

TCS: Buy | Target: Rs 2,510 | Return: 18 percent

The company has grown consistently at industry-leading growth rates on the back of its strategy of adding new clients, winning large deals and co-innovating with customers.

In constant currency, the company has registered a revenue growth of 10.6 percent YoY. Also, net income for the quarter came in at Rs 8,131 crore, up 10.8 percent YoY. Operating Margin and Net Margin came in at 24.2 percent and 21.3 percent, respectively.

L&T: Buy | Target: Rs 1,820 | Return: 33 percent

L&T is the undisputed market leader in India’s capital goods and construction space. The likely recovery of India’s capex cycle, especially infra and hydrocarbon, would benefit L&T substantially with double-digit revenue growth and faster order book expansion.

The company has registered a revenue growth of 9.7 percent at Rs 29,636 crore versus Rs 27,004 crore. Net profit of the company was up 21 percent at Rs 1,472 crore. We have incorporated the latest numbers to models for the company and continue to remain positive on it.

(The author is Vice President - Equity Advisory at Anand Rathi Shares and Stock Brokers.)

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