Here are about 10 stocks which we think are fundamentally sound and can be attractive buys at current levels.
If you have surplus funds, and a time frame of over 12-24 months, this is the time to increase the allocation to equities, Ramesh Pandit, Stock Market Analyst said in an exclusive interview with FdfNews.
1) What has led to the correction globally?
A spike in interest rates in the US, as well as inflation concerns, led to an initial sell-off in global markets, which got accentuated by overbought positions. The contagion has spread to other asset classes (Bitcoin, base metals, crude etc.) and most emerging markets which is usually the case.
2) How much correction can we expect in our markets?
The fact is that markets were not prepared for a large sell-off and there was a bit of complacency and exuberance across equity markets which were reflected in the low IVs (Implied volatility, which has reversed in past couple of days). Let’s look at historical correction patterns.
3) Should investors buy into this correction?
A) If you have surplus funds and have a time frame of over 12-24 months, this is the time to increase the allocation to Equities as we have seen a meaningful correction in the market after a long time. We see this as an opportunity for retail investors as this is happening at a time when there is earnings growth revival is seen across companies after a gap of almost 3 years.
4) Stocks to buy for investors with a time frame of over 24 months.
A) We have shortlisted stocks which have been part of our research coverage, have reported good numbers in December quarter and has upside potential of over 15%. It’s time to go shopping in a staggered manner to take advantage of the volatility.
4) What are the stocks that investors can buy in a volatile market like this?
A) We have about 18 stocks which we think are fundamentally sound and can be attractive buys at current levels:
UPL: On the cusp of cyclical recovery: Target Rs601| Support 950| Return 35%
The management has retained its guidance of 8-10 percent growth in revenue and 50-75 BPS expansion in EBITDA margin for FY2019.
The global agrochemical industry is expected to improve going ahead given the expected cyclical recovery in CY2019, led by decreasing channel inventories in key regions and some uptick in agri commodity prices.
UPL is better placed to benefit from this recovery over the next 2-3 years. The key geographies of LATAM, India and North America to report healthy growth in the near-term.
V-Guard: Target Rs295| Support Rs234| Return 25%
The electrical and consumer division drive revenue growth in Q2FY19. A number of initiatives are underway to accelerate revenue growth from non-south markets.
Higher focus on above the line spending will consolidate its position as a pan-India player. The company has a cash-rich balance sheet and robust return ratios justify a premium valuation of V-Guard.
HDFC Ltd: Target Rs 3210 | Support Rs2276| Return 26%
The mortgage lender reported strong Q2FY19 results with robust operating performance and steady spreads and NIMs. It reported a strong loan book growth of 23.1 percent YoY and 4.6 percent growth. HDFC’s attractive bouquet of associates/subsidiaries provides further value.
Godrej Consumer: Target Rs925| Support Rs610| Return 48%
For the December quarter, GCPL registered a strong bottom-line growth of 33.8 percent driven by 210BPS expansion in the OPM.
The domestic business registered strong comparable revenue growth of 17% with the soap segment and hair colour segment growing by 24 percent and 33 percent respectively (on a comparable basis) during the quarter.
Recovery in rural demand, addition to product portfolio will aid further revenue growth on the domestic front while improvement in African and Indonesian businesses will spur international business ahead in the forthcoming quarters.
Yes Bank: Target Rs210| Support Rs95.60| Return 122%
Yes Bank reported strong operating performance in Q2FY2019. The asset-quality performance of the bank has recovered well. The stock is trading at 2.7x its FY2019E BV, which is reasonably valued. somehow currently its recovering and it will perform very well in Q3 and Q4 for 2019.
Ashok Leyland: Target Rs157| Support 74.25| Return 101%
The company reported a double-digit growth in MHCV which is likely to continue. Ashok Leyland Limited (ALL) the key beneficiary as MHCV which contributes 70 percent towards its revenues.
ALL is set to grow in the LCV business and plans to launch a new product every quarter. Earnings of ALL are expected to grow by robust 120 percent in FY2019-FY2020.
Bajaj Finance Ltd: Target Rs4256| Support 3272| Return 36%
Bajaj Finance (BAF) posted strong operational performance during Q2FY2019. The company continued to report healthy growth momentum.
The asset quality remained steady for the quarter. We believe the ability of BAF to carve out various products in niche categories and prudent management practices would help it to keep business growth in the higher trajectory.
L&T: Target Rs1620| Support Rs1395| Return 12%
In Q2FY19, L&T delivers margin expansion and strong bottom line growth due to cost curtailment and robust execution capabilities.
L&T is the best play on the domestic capex cycle recovery and will be able to enhance order book growth given its execution efficiency.
HCL Technologies Ltd: Target Rs1250| Support Rs1003| Return 16%
Revenue growth surprised positively for the quarter ended December, led by strong growth in E&RD services, margin performance remains stable QoQ.
The management reiterated at achieving the lower end of the revenue guidance for FY2019E. Expect organic revenue growth to rebound in FY2020E, led by strong order booking.
Industry-leading revenue growth and stable margin execution provide comfort on valuations, among top-tier IT companies.
Infosys: Target Rs1080| Support Rs790| Return 19%
Infosys has reported an in-line set of numbers for Q2FY2019, with constant currency (CC) revenue up 0.8% q-o-q and EBIT margin at 24.3%.
The new CEO will lay out the strategic priorities in April, while President Rajesh Murthy, who manages operations of Europe (25% of total revenue) quits.
The management hopes for a pick-up in spends by BFSI clients in CY2018, led by ramp-up deals in insurance and higher digital adoption by clients.
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