Largecap and quality midcaps are a better bet at current levels. In terms of sectors, investors can look at banking, insurance, AMC companies, IT and retail-oriented stocks
Now that the state election results are pretty much clear, the focus has now shifted to the General Elections 2019. As per the trends, BJP's failure to get a clear majority in all three Hindi heartland states — Chattisgarh, MP, and Rajasthan — will bring the government back to the drawing board.
So what should investors do now? For market, the ride till general elections in April-May 2019 is likely to remain volatile. Most experts feel that gains are likely to remain capped at 11,000 on the Nifty, on the higher side, but the dips will give investors a good buying opportunity.
Largecap and quality midcaps are a better bet at current levels. In terms of sectors, investors can look at banking, insurance, AMC companies, IT and retail-oriented stocks.
“This now indeed makes central elections more speculative. Mostly, BJP will have to ally with other parties to form govt at the Centre,” Pritam Deuskar, Fund Manager, Bonanza Portfolio told Moneycontrol.
“If we look at history, the Vajpayee government didn’t come to power in 2004. The market for one-two days reacted negatively but post that we saw biggest bull run till 2008 and when the government came back again in 2009, markets reacted positively for two days, but post that markets remained flat for a long period,” he said.
Deuskar further added that we should simply ignore reactions for some days or short period and focus on what's coming and current good quality companies whose growth is most viable.
In the very short term, the market has largely discounted the outcome. Hence, further carnage is ruled out. The broader range for the market could be 9,700-11,000.
“A corollary would be that there would be stock-specific movements which one needs to catch. For investors, we feel, levels around 9,700-9,500 would be the levels to accumulate fundamental stories (not just fundamental figures &/or ratios) that, too, in a staggered manner. Sometimes, looking at the screen & doing nothing, is an art,” Pushkaraj Sham Kanitkar, AVP - Technical Research at GEPL Capital told Moneycontrol.
Here is a list of top 10 stocks to buy now which could give 18-50% return in the next 1 year:
HCL Technologies: Buy | Target: Rs 1,330| Return 38%
Elara Capital maintains a buy rating on HCL Technologies with a target price of Rs 1,330. The company's acquisition of seven products from the US-based IBM has been met with such skepticism that market cap erosion was about 56 percent of the USD 1.8 billion that HCL has agreed to pay towards the deal.
The brokerage firm reiterates IP acquisitions would improve differentiation in large outsourcing deals and management commentary concurred in 1QFY19. Elara Capital believes that the market has ignored HCL’s potential to broaden its client base significantly.
Zydus Wellness: Buy| Target: Rs 1,472| Return 18%
Sharekhan maintains a buy rating on Zydus Wellness with a target price of Rs 1,472. Prudent fundraising plans, through a mix of debt and equity, reduce the risk of significant earnings dilution in the coming years.
The acquisition will enhance the overall product portfolio of Zydus and will make it a formidable player in the health and wellness space.
Further, the stock price of Zydus has corrected by about 10 percent since the announcement of acquisition due to non-availability of funding details of the acquisition.
Hence, the domestic brokerage firm upgraded its rating on the stock from hold to buy with a revised price target of Rs 1,472 (rolling it over to FY2021 earnings, valuing at 28x).
Apollo Tyre: Buy| Target: Rs 285| Return 26%
SMC Global Securities maintains a buy rating on Apollo Tyres with a target price of Rs 285. Apollo Tyres is one of the leading tyre manufacturing companies in India with products exported to over 100 countries.
The consistent focus on manufacturing excellence and quality has helped Apollo bag new OEM contracts and carve a niche for itself in the aftermarket.
The robust volume growth from OEMs, continued decline in Chinese imports & increased brand investments across categories and mediums augurs well for the company’s growth prospects.
It is expected that the stock will see a price target of Rs 285 in 8 to a 10-month time frame on a target P/E of 13.6 and FY20 EPS of Rs. 20.98.
Automotive Axles: Buy| Target: Rs 1,791| Return 35%
SMC Global Securities marinated buy rating on the company with a target of Rs 1,791. Automotive Axles is a joint venture between the Kalyani group and Meritor.
Sale of higher tonnage commercial vehicles is expected to increase on the back of healthy ramp-up in infrastructure projects. Further, the implementation of BS-VI norms is also expected to trigger a significant pre-buying of commercial vehicles.
These are expected to support the business prospects of the company going forward. The management is confident of a sustainable future for the organization owing to a strong team and robust processes.
It is expected that the stock will see a price target of Rs 1,791 in 8 to a 10-month time frame on a target P/E of 22 and FY20 EPS of Rs. 81.42.
Tata Steel: Buy| Target: Rs 720| Return 40%
Edelweiss Securities maintained its buy rating on Tata Steel with a target price of Rs 720. The European Commission (EC) has “stopped the clock” in its in-depth investigation (Phase-II) on the proposed joint venture (JV) between Tata Steel’s (TSL) European operations and ThyssenKrupp’s (TK) Steel Europe division pending certain details from both parties.
We believe this is not a cause for concern as: 1) such procedures are commonplace in big transactions like the one in question, and 2) both parties are expected to provide the required documents in “a few days”.
While we do not rule out additional pressure on the TSL stock until the investigation resumes, at this stage we do not believe the deal deadline would be missed materially. Maintain ‘BUY’ on TSL with an unchanged target of Rs 720.
Dishman Carbogen Amcis: Buy| Target: Rs 355| Return 50%
HDFC Securities maintained its buy rating on Dishman Carbogen Amcis (DCAL) with a target of Rs 355. With an increasing pressure on innovators to cut costs, the global CRAMS market is growing at a healthy double-digit rate.
The domestic brokerage firm believes that DCAL is steadily carving out a reputation as a reliable partner for innovators. With 17-18 products in phase III, the flow of lucrative commercial launches is likely to continue.
HDFC Securities expect this to not only drive further growth and profitability but also reduce dependence on single blockbusters (like Niraparib), leading to lower earnings risk.
La Opala RG: Buy| Target: Rs 299| Return 34%
Nirmal Bang Institutional Equities initiated coverage on La Opala with a buy rating and a target of Rs 299. La Opala RG (LORL) ventured into the opalware segment in the late 1980s, while its competitors entered this space only a few quarters ago.
Just by sheer experience, the brokerage firm feels that it can be reasonably sure that LORL has a far better understanding of product manufacturing, channel-partners’ demands and consumers’ expectations. In fact, it views the entry of new players as a positive signal for the industry and its future growth prospects.
With the buoyant and favourable consumer sentiment, Nirmal Bang expects LORL to increase its revenues and EBITDA at 13.2% and 14.2% CAGR over FY18-FY21E. Our growth rate estimate is lower than the Bloomberg consensus estimate and presents our base case scenario.
LORL’s stock is already down 40% from its recent highs and offers a good entry point for medium/long-term investors.
Dewan Housing Finance: Buy| Target: Rs 300| Return 49%
Angel Broking maintained its buy rating on Dewan Housing Finance post Q2 results with a target price of Rs 300. Dewan Housing Finance (DHFL) posted steady operating performance yet again in 2QFY18, however, liquidity issues began at the end of the quarter.
DHFL’s business grew in the quarter with a 35 percent YoY rise in loan book to Rs 1,10,100 crore. The current liquidity issue would completely reset midterm growth path and return ratios.
The brokerage firm expects the loan book to slow down significantly over FY18‐20, driven by the rising cost of funds. Considering, the above parameters, we have moderated our loan growth expectations for the company from 30 percent to 5 percent for FY2019E.
Zee Entertainment: Buy| Target: Rs 627| Return 31%
Nomura maintained its buy rating on Zee Entertainment with a target price of Rs 627. The management on the sidelines of the India Corporate Day held in Hong Kong indicated there are considerable opportunities in digital in the Indian market and that this can be capitalised with the right partner, hence its stake sale intent announcement to attract a strategic buyer.
The management maintains its target of 30 percent of revenues from the digital segment in five years. In traditional business, advertisement and subscription growth remain healthy. There were also queries on high pledging (60% of promoter shareholding).
They also mentioned that Essel Group is in various stages of discussion on the liquidation of the power transmission and solar assets, and it is working on the liquidation of the road assets. If these materialise, it should bring down most of the pledging.
Motherson Sumi Systems: Buy| Target: Rs 197| Return 28%
Nomura maintained its buy rating on Motherson with a target price of Rs 197. The management on the sidelines of the India Corporate Day held in Hong Kong indicated that organic growth will depend on car industry growth and there could be some fluctuations in the short term.
However, the focus of the company will remain on improving the bottom line across its businesses. On inorganic opportunities, valuations of recent transactions are still unreasonable and are reminiscent of the 2004-06 period, when customers were paying prices that were too high. Management will do acquisitions if it sees 40 percent ROCE being generated.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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