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Worst may be behind: Experts suggest these 10 stocks for your portfolio

The market is expected to break out of its 3-month high soon and Nifty may hit 10,300 this week itself, feels an expert

June 02, 2020 / 09:58 AM IST
 
 
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The benchmark indices added another 3 percent on June 1, the first day of lockdown 5.0 as the government allowed resuming economic activities in non-containment zones.

On June 1, the Nifty50 closed 252.25 points, or 2.63 percent, higher at 9,832.55 and the BSE Sensex gained 893.74 points, or 2.76 percent, to end at 33,317.84.

"The rally we are seeing could be on the back of hope of more government action in terms of measures to get economy on fast growth track. Also, the market feels that the worst in terms of pain may be behind," Shailendra Kumar, CIO at Narnolia Financial Services told Moneycontrol.

Sanjiv Bhasin, Executive VP-Markets & Corporate Affairs at IIFL also feels the lockdown is behind us and the economy may get back on track, market was unhappy with banks but banks look to be in a good position now, stimulus announced recently will reflect in the economy.

Hence, given the positive momentum with respect to economy, experts feel 10,000 on Nifty is expected soon, and the market will get the new range for trading with upper band at 11,000.

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"Counting all above mentioned factors, the market is expected to breakout 3-month high soon and I expect Nifty at 10,300 this week itself," said Bhasin.

Shailendra Kumar also feels the current rally has strength to hit 10,000 on the Nifty.

Experts suggest these 10 stocks are a good bet to participate in the up move in the coming years:

Prashanth Tapse, AVP Research at Mehta Equities

Granules India

We believe Granules India is a leading global midcap Pharma value chain company manufacturing all the Active Pharmaceutical Ingredients (APIs), Pharmaceutical Formulation Intermediates (PFIs) and Finished Dosages (FDs). It is also homes the one of the World's largest Paracetamol API facilities providing Ingredients for Paracetamol, Metformin, Ibuprofen, Guaifenesin and Methocarbamol. The recent news stating that government lifted restrictions on export of active pharmaceutical ingredients (API) of common pain reliever Paracetamol would be beneficial going forward. The management also expects to settle and resume the plants in a few days. They plan to bring the facilities to 25 percent working of the capacity immediately and slowly improve it to 50 percent which would be reflected in Q1FY21E. The promoter has announced that the recent buyback would lead to a meaningful reduction of the pledged shares which acts as positive catalyst for the stock.

HDFC Life Insurance Company

Investor looking for a high quality business with consistent earnings growth, HDFC Life offers the best in class investment opportunity to accumulate at the current levels. We see opportunity for insurance industry amid COVID-19. We believe people would start realizing the importance of insurance and the backing it provides in the trying times like the current ones. Even though there has been a slowdown in the last 2 months in terms of adding new policies, we still believe HDFC Life is optimistic on protection growth and as soon as things get normalised in near future people will look for brand and take up policy for life. HDFC Life continued to be the market leaders in terms of total new business received premium with a leading market share in the private sector compared to others. Hence we believe the stock to deliver steady returns over the medium term.

BPCL

We like BPCL business best in segment operating four refineries with a combined capacity of 38.3 million tonnes per annum, which is 15 percent of India's total refining capacity of 249.4 million tonnes. BPCL also owns 15,177 petrol pumps and 6,011 LPG (liquefied petroleum gas) distributor agencies in the country. Besides, it has 51 LPG bottling plants. The company distributes 21 percent of petroleum products consumed in the country by volume as of March this year and has more than a fifth of the 250 aviation fuel stations in the country.

We believe the key catalysts for BPCL is developments on disinvestment which should keep news flow supportive. The proposed strategic disinvestment of its entire shareholding in BPCL looks to sell it to an overseas oil firm. The government has for the second time extended the deadline for bidding for privatisation of India's second-biggest oil refiner Bharat Petroleum Corp (BPCL) by over a month to July 31. On valuation parse BPCL is trading at an attractive valuation of 1.8 times P/B (3-year avg P/B is above 2 times) and stock is trading at P/E: 8.2 FY21E with good dividend yield above 5 percent.

Tata Consumer Products

We like Tata Consumer Products (formerly Tata Global Beverages) business which is on its way to becoming a diversified FMCG company with the addition strong foods portfolio from Tata Chemicals (salt, pulses, spices) to its already strong tea, coffee and water portfolio both in India and internationally. We believe the acquisition of the consumer products portfolio of Tata Chemicals is transformational strategic plan for Tata Consumer as it provides long-term revenue growing opportunities. We also consider a positive opinion on recently managerial change with Mr Sunil D’souza (ex Unilever, Coca Cola, PepsiCo, Whirlpool) taken over as MD & CEO in April 2020. Tata Consumer Products would be in a unique position to leverage the strong brand, wider product portfolio and distribution reach to serve the growing aspirations of consumers across the country. Hence we hold a positive outlook on the counter.

Mishra Dhatu Nigam

Mishra Dhatu Nigam is a government promoted leading manufacturer of special steel, super alloys and titanium alloys catering to niche end-user segment. We like Midhani business model and its presence in one of the few metallurgical plants of its kind in the world, designed to manufacture a wide range of special metals and alloys using integrated and highly flexible manufacturing systems. Midhani also aims to expand geographically and operate from multiple locations. The company has been servicing the requirements of core strategic sectors like defence, space, power and nuclear for nearly three decades. Company is a strategic material supplier/ partner to Indian defence, space and energy sectors and last year Midhani’s growth has been primarily driven by space and energy sector due to increased number of launches by ISRO and ‘Make in India’ program respectively. Hence we believe vocal for local tagline Midhani would stand well placed to tap the opportunity.

Sumit Bilgaiyan, Founder of Equity99

VIP Industries

Enhanced product mix and focus on product designs over utility will aid growth. It is a niche company in travel related industries which will have a long runway for growth. It has shown stellar RoCE/RoE performance over the last decade. It is currently trading at 22x trailing EPS which is considerably lower than pre-COVID valuations.

Ashok Leyland

We expect revenue growth to rebound in FY22 on the back of a revival in commercial vehicle cycle. We expect cash accruals to improve, led by a strong volume uptick in FY22, an improvement in Ebitda margin, better product mix and operating leverages. Ashok Leyland will be facing a sharp drop in volumes in FY21. Historically, commercial vehicles cycle has seen a 2 yr bearish period followed by a 3-4 year bullish period. It is currently trading at 12x trailing EPS which gives significant margin of safety to the investor.

Crompton Greaves

The company has made significant efforts in branding, premiumisation and product innovation which are driving growth under the new management. It’s looking to increase its distribution reach by 50-60 percent. It is one of the best performing companies in the consumer durables space, also a mass premium brand which is best suited for India.

Bharti Airtel

Bharti Airtel is one of the top telecom players in India, and is currently in an oligopolistic market with only rivals Jio and Voda Idea. The barriers to entry is extremely high in this industry, and the pricing power has come back with the players due to consolidation over the last decade. Mobile revenues would benefit from a steep tariff hike of 20-40 per cent taken across prepaid plans with effect from December 4, 2019. We believe it would be the best stock to hold to play the digitalisation theme in India.

Prince Pipes

Prince Pipes is the 5th largest pipe players in India with market share of 5 percent in a Rs 30,000 crore industry. It has all four varieties of resins, namely, PVC, CPVC, PPR and HDPE and caters to all end-user applications like agriculture, plumbing and infrastructure. It has created a good brand image by the advertising activities in recent years and also has a robust distribution network (1,408 distributors) comparable to the market leader. It has manufacturing plants spread across India which helps it to reach all the markets, also it is planning to add a new plant in Telangana from the IPO proceeds which will fuel further growth in East and South India markets. Current it is trading at 8x trailing EPS (60 percent below IPO valuation), which makes it a compelling buy.

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.
Sunil Shankar Matkar
first published: Jun 2, 2020 09:58 am

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