The market has always provided buying opportunities, especially when there has been panic selling based on a news or event. That is the best time for quality shopping for any long-term investor, Prashanth Tapse, AVP of Research at Mehta Equities told Moneycontrol's Sunil Shankar Matkar.
If you really understand a company and have faith in the management and business dynamics, these are brilliant opportunities. But if you do not understand the company or market sentiment, do not buy individual companies. Invest in a mutual fund, which is the best way to diversify risk, Tapse said. Edited excerpts:
The market has turned volatile in the past one-and-half-months. Over the next 6-9 months, where is it headed?
Historically speaking, panic selling based on some news or events can only be good buying opportunities. Irrational movements offer good buying opportunity in quality companies as so-called fear is hypothetical and, hence, won’t last long.
Once the fear subsides, the market will rebound in its own style. Long-term fundamentals have not changed and the market over-reacted for short-to-medium term.
Even after this carnage, the Nifty is still in positive zone. Till the time it doesn't breaches 9,951.9, it is in an uptrend as the index is making higher highs & higher lows.
Analysing historical data, we expect Nifty to consolidate and trade in range 10,780-9,951.9. Once it crosses its 200 moving avg (10,780) the Nifty will give a confirmation of trend (rangebound to uptrend).
Based on our assumption, we can see the Nifty near 11,500 -11,900 on or before FY19.
Is it the right time to go shopping for stocks and what are the sectors to look at & avoid after the recent correction?
Yes, we believe it is a good time for quality shopping for a long-term investor, if you really understand the company and have faith in the management and business dynamics. These are brilliant opportunities to accumulate quality companies.
Wherever the management is solid, they will be able to weather this storm and come out stronger.
At this point, if you do not understand the company or market sentiment, do not buy individual companies. Invest your money in a mutual fund, which is the best way to diversify risk.
SIPs (Systematic investment plans) are done by investors to meet long-term goals and should be done for at least 5-10 years. We advise investors to not be worried about near-term volaility or small negative returns in the near-term. The time should be used to add more units at lower levels and when the market turns around, you will see the real benefits of SIP.
Is it a good time to buy gold (it has corrected 8% in the last one year) or equity?
US dollar index has failed to cross 97-level and has came down to 94.70. The mid-term outlook for gold is positive.
Global spot gold has crossed major hurdle level of $1,210 now and we are expecting that it can easily test $1,240 & $1,285 in near term because of upcoming festival season, which will increase the local demand for gold.
The major concern is currency. We strongly feel that rupee will get stronger against the dollar and because of this, we might not be able to see the jump of gold in rupee terms.
The US bond yield is one of the major reasons for the fall in emerging markets. Will India be able to overcome this factor?
Growing bond yields indicate better health of US economy and the combination of a rebounding US dollar and further rate hikes may not be systemically good for emerging markets.
Indian economic fundamentals have not changed significantly and we are close to the peak in yields for the year as the US economy from these levels will grow at a decent pace. But, if rates continue to move up, FII money would be staying away from EMs, including India.
As the consumption basket corrected a lot in recent fall, is it the right time to buy consumption space or stay away, especially after mixed auto sales data for past two months and HUL earnings?
Consumption space such as passenger, two-wheeler etc., we expect the growth could be moderate or weak compared to a year-ago month due to below normal average rainfall. This directly impacts rural incomes and rising fuel costs are additionally impacting buying decisions for short term.
Given the uncertainty over trade wars, high fiscal deficit, rising interest rates in the US and forthcoming general elections in India, we believe it is best time for investors to be defensive and have a higher allocation to quality companies where earnings visibility is higher.
The recent correction in the stock provides a reasonable entry point to take exposure to a high quality defensive bet.
What are your top five fundamental ideas for a one to two-year period?
Kolte-Patil | Target: Rs 320
Strong momentum in Bengaluru continues, which contributes 12.9% of sales volume. The company's Mumbai and Bengaluru business is expected to grow around 25% of sales by 2020.
There are significant launches in pipeline this year that will result in significant uptick in sales volumes in H2FY19.
Hence, we recommend investors to accumulate on dips with target price of Rs 320, upside of 33% expected on medium to long term long term investment horizon.
Radico Khaitan | Target Rs 440
It is one of the largest manufacturers of Indian Made Foreign Liquor (IMFL) in India and is one of the few companies that have developed its entire brand portfolio organically.
This includes Magic moments vodka, which leads the vodka industry with more than 50% market share. This is followed by Morpheus Brandy, which has 60 percent share. Other brands include After Dark whisky, 8PM whisky, Contessa Rum.
We expect the company would go debt-free in next 2-3 years and hence stocks looks attractive at current levels with a target price of Rs 440 and an upside of 22%.
HDFC Life | Target: Rs 520
Considering optimal scale of operations, efficient use of distribution channels (bank support), healthy persistency ratios and higher new business mix from protection business drives future growth.
On valuation the stock is available at premium valuations to its listed peers. While we expect this to sustain and the stock to deliver steady returns over the medium- to long-term, it offers the best in class investment opportunity to buy at the current levels.
Maruti Suzuki | Target: Rs 9,000
Expected slowdown in the passenger vehicle industry is discounted in the current levels. Upcoming festive season and discount offers can give some sort of relief for demand, while in the near term growth is expected to be slow, medium to long-term growth outlook for the industry stays intact.
Despite the near-term headwinds, we believe the sharp correction provides an opportunity to buy one of the best consumer discretionary plays in India.
RBL Bank | Target: Rs 698
RBL Bank would be best in class private banking space and has high potential to grow big in the next 2-3 years considering resourceful team driving growth, focus on operational quality & scalability and target strategy of increasing retail advances. This will bring in growth and margin expansion and good asset quality.
The stock is valued at 2.9x its FY2020E BV of Rs 200. We feel it quite attractive given the growth prospects of the bank and hence recommend investors to accumulate the stock with a target price of Rs 698.
Also read: On Dussehra, Anand Rathi is betting on 5 stocks with a 1-year view
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