Muhurat picks- 7 stocks to buy for next year: ICICIdirect

ICICIdirect.com's muhurat picks 2014

Equity markets have rallied over 25% since last Diwali, largely fuelled by improving corporate earnings, expectations of tough reforms from the new government and reviving macroeconomic variables. The government has already initiated several confidence building measures and taken key decisions like allowing FDI in several sectors, railway fare hike, online environment and forest clearance, etc.

The government’s pro-activeness is complemented by robustness in economic data points. GDP growth has revived to a nine-quarter high of 5.7% in Q1FY15, strengthening hopes of an economic turnaround and a shift to a high growth trajectory. Secondly, softening crude prices at a 27-month low of $91/barrel would cushion the current and fiscal account imbalances. At current levels, under-recoveries are expected to decline to ~Rs 80,500 crore in FY15 from ~Rs 140,000 crore in FY14. Thirdly, declining crude prices would also help soften inflation, which had remained at elevated levels for much of the recent past. Consequently, we expect CPI to reach below 7% by FY15 from the current 7.8% levels, which could pave the way for rate cuts.

Sensex earnings grew 17.1% in FY14, partly aided by suppressed cumulative growth of 6.9% in last two years. Earnings are expected to grow 16.2% in FY15E before reviving to 18.5% in FY16E. We expect Sensex to trade at 16.5x FY16E EPS of 1880 at 31000 by next Diwali.

Read More